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Today's Futures Heat Map • Weakest: Milk, Lean Hogs, Cotton, Lumber
By: Barchart | March 31, 2023
• Today's Futures Heat Map
Strongest: Natural Gas, Soybean, Heating Oil, Soybean Oil
Weakest: Milk, Lean Hogs, Cotton, Lumber
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Grains Report: Wheat, Rice, Corn and Oats, Soybeans
By: Jack Scoville | March 31, 2023
• WHEAT
General Comments: Wheat markets were mixed yesterday, with SRW lower but HRW and Spring a little higher. In addition, Russia announced it is increasing taxes on exports of Wheat. Cargill and Viterra said that they will shut export programs in Russia and might be bowing to Russian pressure to do so as the country is moving to take more control of the export program. Trends are mostly up on the daily charts. Ideas that big Russian offers and cheaper Russian prices would be a feature for a while in the world market was the driving force for the weaker prices. Ideas are that both Australia and Russia are harvesting record to near record Wheat crops this year. The demand for US Wheat in international markets has been a disappointment all year and has been hindered by low prices and aggressive offers from Russia.
Overnight News: The southern Great Plains should get mostly dry conditions. Temperatures should be above normal. Northern areas should see scattered snow showers in southern areas. Temperatures will average below normal. The Canadian Prairies should see mostly dry conditions. Temperatures should average below normal.
Chart Analysis: Trends in Chicago are mixed. Support is at 675, 654, and 648 May, with resistance at 712, 724, and 728 May. Trends in Kansas City are mixed to up with objectives of 945 May. Support is at 853, 843, and 823 May, with resistance at 878, 896, and 898 May. Trends in Minneapolis are mixed to up with no objectives. Support is at 860, 846, and 833 March, and resistance is at 892, 899, and 910 May.
• RICE:
General Comments: Rice was lower with most of the weakness in new crop months as the trade expects bigger planted area. Trends are mixed on the May charts. The weekly export sales report showed weaker demand. Demand has been good from domestic sources and offers seem hard to find right now. Export demand has been uneven and was low last week. Export demand has been an issue for the market all year. Mills are milling for the domestic market in Arkansas and are bidding for some Rice. Markets from Texas to Mississippi are called quiet. Demand in general has been slow to moderate for Rice for exports. Planting remains active in Texas and southern Louisiana with field conditions called very good in Louisiana and too dry in parts of Texas.
Overnight News: The Delta should get scattered showers. Temperatures should be above normal.
Chart Analysis: Trends are mixed. Support is at 1739, 1724, and 1712 May and resistance is at 1772, 1800, and 1820 May.
• CORN AND OATS
General Comments: Corn closed a little lower yesterday as traders prepared for the USDA reports that will be released later today. The USDA export sales report came in at the low end of trade expectations. Oats were mixed and trends remain up in this market. US prices are currently very competitive with those from South America as Brazil concentrates on Soybeans exports and not Corn and US demand has improved because of the price differentials and the lack of a Brazil offer into the market. This trend should continue for the next few months if not longer. Prices from South America should now remain strong as countries there concentrate on Soybeans exports and not Corn. The Brazil Summer crop and the Argentine crop is developing under stressful conditions. It has been wet so the Soybeans harvest has been delayed and the Safrinha Corn planting is becoming delayed as well. These delays continue, but the harvest of Soybeans and the planting of Corn is now progressing well. Brazil sources say that 20% of the Winter crop could be planted outside of the ideal window so yields could be hurt in the end. NOAA is forecasting that La Nina will develop this Summer and replace El Nino. US growing conditions are usually good when this happens. However, it is very wet now and some early planting has been delayed.
Overnight News:
Chart Analysis: Trends in Corn are up with objectives of 663 and 681 May. Support is at 643, 638, and 628 May, and resistance is at 655, 660, and 668 May. Trends in Oats are up with objectives of 400 May. Support is at 370, 367, and 362 May, and resistance is at 380, 386, and 388 May.
• SOYBEANS
General Comments: Soybeans the products were mixed yesterday, with Soybean Meal a little higher, Soybean Oil lower, and Soybeans mixed. Traders were getting ready for the release of the USDA reports later today. The trends are mixed in these markets. Reports from Brazil show that basis levels there are under pressure due to the large crop being harvested now. Private analysts say the harvest there is now 70% complete. However, the basis might get higher later in the marketing period as total South American production is probably about the same as last year. Brazil has a very good crop, but the additional Soybeans grown in Brazil will be wiped out by the losses in Argentina. Argentina has been forced to import from Brazil to keeps its crushing facilities operating. Soybeans export demand is flowing to Brazil now. It remains hot but rains are reported in Argentina and crop conditions are getting stable. Forecasts from NOAA for very good growing conditions in the Midwest were also a factor, but there is too much rain in most growing areas right now.
Overnight News:
Chart Analysis: Trends in Soybeans are mixed to up with no objectives. Support is at 1462, 1451 and 1445 May, and resistance is at 1500, 1516, and 1532 May. Trends in Soybean Meal are mixed. Support is at 447.00, 435.00, and 422.00 May, and resistance is at 467.00, 475.00, and 485.00 May. Trends in Soybean Oil are mixed. Support is at 5390, 5130, and 5000 May, with resistance at 5600, 5810, and 5980 May.
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Softs Report: Cotton, OJ, Coffee, Sugar, Cocoa
By: Jack Scoville | March 31, 2023
• COTTON
General Comments: Cotton was mixed to generally higher yesterday as traders prepared for the plant4ed area and quarterly stocks reports to be released this morning by USDA. The trade expects planted area to be about 11.2 million acres this year. The weekly export sales report wqas strong yesterday and featured buying from Vietnam and China. Ideas are that the world economic problems were fading into the background as the US stock market has rallied. Chart trends turned p. Chinese buying should stay strong as the country improves economically as it opens up from the covid lockdowns.
Overnight News: The Delta will get scattered showers and storms and above normal temperatures. The Southeast will see mostly dry conditions and above normal temperatures. Texas will have mostly dry conditions and above normal temperatures. The USDA average price is now 80.44 ct/lb. ICE said that certified stocks are now 1,485 bales, from 1,485 bales yesterday.
Chart Trends: Trends in Cotton are up with objectives of 8770 and 9910 May. Support is at 81.20, 80.30, and 79.80 May, with resistance of 84.60, 85.20 and 86.90 May.
• FCOJ
General Comments: FCOJ was higher after trading on both sides of unchanged. Trends remain up in the market. Futures remain supported by very short Orange production estimates for Florida. Demand is thought to be backing away from FCOJ with prices as high as they are currently. Historically low estimates of production due in part to the hurricanes and in part to the greening disease that have hurt production, but conditions are significantly better now with scattered showers and moderate temperatures. The weather remains generally good for production around the world for the next crop including production areas in Florida that have been impacted in a big way by the two storms seen previously in the state. Brazil has some rain and conditions are rated good. The Florida Dept of Citrus said that FCOJ inventories are down 38% from last year.
Overnight News: Florida should get mostly dry conditions. Temperatures will average above normal. Brazil should get scattered showers and near normal temperatures.
Chart Trends: Trends in FCOJ are up with no objectives. Support is at 260.00, 257.00, and 254.00 May, with resistance at 275.00, 281.00, and 287.00 May.
• COFFEE
General Comments: New York closed slightly higher yesterday, and London closed higher on ideas of little on offer from producers. Producers in Vietnam are said to have low stocks left to sell. Trends remain down in New York but are sideways in London. The lack of offers from South America and Vietnam is still supporting prices and reports indicate that demand for Robusta from Vietnam is strong and increasing due to cost differentials with Arabica. Differentials are now weakening in Brazil, Honduras, and Colombia, but reports indicate that differentials might start to firm up again as production ideas are low for Colombia and Brazil. The weather in Brazil is currently very good for production potential but worse conditions seen earlier in the growing cycle hurt the overall production prospects as did bad weather last year.
Overnight News: ICE certified stocks are lower today at 0.742 million bags. The ICO daily average price is now 164.99 ct/lb. Brazil will get isolated showers in southern areas with above normal temperatures. Central America will get mostly dry conditions. Vietnam will see isolated showers.
Chart Trends: Trends in New York are down with objectives of 165.00, 164.00, and 161.00 May. Support is at 167.00, 165.00, and 163.00 May, and resistance is at 173.00, 176.00 and 180.00 May. Trends in London are mixed. Support is at 2160, 2140, and 2090 May, and resistance is at 2250, 2270, and 2300 May.
• SUGAR
General Comments: New York and London both closed higher and at new highs for the move. Supplies are tight. Indian production is thought to be less than 33 million tons this year as mills are closing early there and Thailand mills are also closing earlier than expected so the crop there might be less. New crop Brazil production is solid this year but is still in the fields. Reports from private analysts suggest that Brazil can have a 13% increase in center-south production. Brazil producers are currently active in the futures market placing hedges on the production. European production is expected to be reduced again this year. Some analysts now say that Chinese production could be the lowest in six years due to bad growing conditions.
Overnight News: Brazil will get isolated showers in southern areas. Temperatures should average above normal. India will get mostly dry conditions and near to above normal temperatures.
Chart Trends: Trends in New York are up with objectives of 2210 and 2310 May. Support is at 2140, 2100, and 2070 May and resistance is at 2220, 2250, and 2280 May. Trends in London are up with no objectives. Support is at 619.00, 608.00, and 600.00 May and resistance is at 640.00, 646.00, and 652.00 May.
• COCOA
General Comments: New York and London closed higher yesterday. London was initially lower and actually hit the first target down for the move before rebounding to close back in the trading range and with slight gains. New York held to the recent range and closed at the upper end of the range. New York appears ready to make a new leg up on the charts. Wire reports suggest that producer selling increased on the recent rally in these markets. Trends remain up for at least the short term. Talk is that hot and dry conditions reported in Ivory Coast could curtail main crop production, and main crop production ideas are not strong. Mid crop production ideas are strong due to rains recently reported in Cocoa areas of the country. Ghana has reported a disease in its Cocoa to hurt production potential there, but overall production expectations are high. The rest of West Africa appears to be in good condition. The weather is good in Southeast Asia. Ivory Coast exports are now 1.7857 million tons down 1.5% from last year.
Overnight News: Isolated showers are forecast for West Africa. Temperatures will be near normal. Malaysia and Indonesia should see scattered showers. Temperatures should average near normal. Brazil will get isolated showers and near to above normal temperatures. ICE certified stocks are lower today at 5.232 million bags.
Chart Trends: Trends in New York are mixed to up with objectives of 2960 May. Support is at 2850, 2820, and 2780 May, with resistance at 2920, 2960, and 2990 May. Trends in London are mixed. Support is at 2100, 2070, and 2030 May, with resistance at 2160, 2200, and 2230 May.
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Grain Reports To Set The Tone. The Corn & Ethanol Report
By: Daniel Flynn | March 31, 2023
We kickoff the day with Personal Income MoM, Personal Spending MoM, PCE Price Index YoY, and Core PCE Prices MoM & YoY at 7:30 A.M., Chicago PMI at 8:45 A.M., Michigan Consumer Sentiment Final, Michigan 5-Year Inflation Rate Final, Michigan Consumer Expectations Final, Michigan Current Conditions Final, and Michigan Inflation Expectations Final at 9:00 A.M., Prospective Plantings and Quarterly Grain Stocks at 11:00 A.M., Baker Hughes Oil & Total Rig Count 12:00 P.M., fed Williams Speech at 2:05 P.M., and Fed Cook Speech at 4:45 P.M.
On the Corn Front Export Sales were at the low end of expectations at 41 million bushels. Besides China’s buying spree there was very little business from our usual buyers. We still believe the crop will have shortages, but if you speak to a veteran grain trader he would say come harvest we will have corn coming out of our ears. This year I beg to differ with Argentina and Ukraine participation in the export market will be minimal. That is why I believe this will put a bullseye on Quarterly Grain Stocks and if your late to the dance it will cost desperate importers dearly, if my pontification comes true. That should be the main focus. Also, with Prospective Plantings will begin the planting season’s gauge of expected acreage. Traders will be holding their breath as we approach the 11:00 A.M., grain reports that will shake & bake the grain complex one way or another. In the overnight electronic session the May corn is currently trading at 651 which is 1 and ½ of a cent higher. The trading range has been 651 ½ to 647 ¼.
On the Ethanol Front the main headline we are now focused on is the Minnesota BNSF train derailment. Raymond, Minnesota, assistant fire chief said crews are now letting the ethanol burn out after spraying thousands of gallons of water to contain the blaze on the train cars that caught fire. Common sense tells me we should invest in pipelines to move these volatile commodities, especially in neighborhoods of high concentrated risk of a derailment developing into a bigger disaster. There were no trades or open interest in ethanol futures.
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The Blind Side. The Energy Report
By: Phil Flynn | March 31, 2023
The petroleum markets are suffering from supply side blindness and the recent drop in oil prices is going to become a problem for the global economy. The market has ignored historic low, spare oil production capacity issues because of the placebo of Strategic Petroleum Reserve supplies that have been fed into the market without much thought to how that would interfere with market dynamics. Yet now we could be paying the price for short sighted market manipulation as a major supply outage, if it continues, could leave the globe undersupplied.
Because of a political dispute, 400,000 barrels a day of Iraqi production has been shut down. Despite hopes for a quick resolution, it appears that both sides are digging in their heels and we are seeing signs that producers are shutting in production.
As Reuters reported, “Turkey stopped pumping Iraqi crude from the pipeline after Iraq won an arbitration case in which it said Turkey had violated a joint agreement by allowing the Kurdistan Regional Government (KRG) to export oil to Ceyhan without Baghdad’s consent. Oil firms operating in the KRI are being forced to halt output or move production into storage, which many say will reach capacity within days, as talks drag between Turkey, Baghdad and the KRG to resume exports.
The longer the dispute goes on, the longer it will take to restart production and this will create a supply side shortage that will cause major crude oil supply to draw in the US and around the world. Vindictive energy policy in the United states especially against oil and gas firms and using the Strategic Petroleum Reserve for political purposes has conspired to discourage investment in oil and gas. Because of that, the average American is going to pay more and be less protected against supply outages in other parts of the world.
A perfect example of this short-sighted policy is the auction of new oil leases in the Gulf of Mexico on Wednesday. Development of Gulf of Mexico oil, the cleanest oil production and the world has been stymied by the Biden administration in another short -sighted attempt to show virtue on the issue of climate change. Biden’s blocking of Gulf of Mexico oil leases has not made the world cleaner, but it’s added to greenhouse gas emissions.
It is clear this administration does not take science into account when it comes to climate change. It’s not about science, it’s about politics. It’s about power and it’s about money. Biden, to get Senator Joe Manchin to go along with his “inflation reduction act” that does little or nothing to lower inflation, gave in and allowed this auction to happen. The problem is that the auction did not go as well as some would expect because oil and gas companies do not trust this administration. Only a very small percentage of what the Interior Department Bureau of Ocean Management put up for auction, which was 73.3 million acres in federal waters, were bid on.
Bloomberg reported that, “The European Commission told member states that a $60-a-barrel cap on the price of Russian oil is proving effective in hurting the Kremlin’s access to petrodollars while not disrupting the market and will remain unchanged for now. The EU may try to convince themselves that the price cap is working but the fact is that it has not been challenged and Russia is having no problem selling oil.
The oil market is getting back most of its banking crisis sell off losses. I’m afraid it’s going to be a wakeup call for oil and gas markets over the next couple of weeks, so buckle up and make sure you’re prepared for what could be a pretty substantial price spike.
Natural gas prices continued to get crushed as production in the US and India exceeds expectations while demand has fallen because of a warmer than normal winter in many parts of the globe. The Freeport LNG criminal course was one of the major factors in pressuring US gas prices lower and now it’s getting very difficult for this market to find a bottom. If you look at the back end of the curve it looks a lot more healthy and we do believe that supplies of natural gas will tighten in the future but right now it’s very difficult to play this market for a long term play.
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Today's Futures Heat Map • Strongest: Sugar, Palladium, Platinum, Silver
By: Markets & Mayhem | March 30, 2023
• Today's Futures Heat Map
Strongest: Sugar, Palladium, Platinum, Silver
Weakest: Natural Gas, Soybean Oil, Wheat, Pork Cutout
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The Corn & Ethanol Report
By: Daniel Flynn | March 30, 2023
We kickoff the day with Export Dales, Corporate Profits QoQ, GDP Price Index QoQ Final, GDP Growth Rate QoQ Final, Initial Jobless Claims, Jobless Claims 4-Week Average, PCE Prices QoQ Final, Real Consumer Spending QoQ Final, GDP Sales QoQ Final, Real Consumer Spending QoQ final, Continuing Jobless Claims, and Core PCE Prices QoQ Final at 7:30 A.M., EIA Natural Gas Storage at 9:30 A.M., 4-Week & 8-Week Bill Auction at 10:30 A.M., Fed Barkin Speech & Fed Waller Speech at 11:45 A.M., and Hogs & Pigs at 2:00 P.M.
On the Corn Front the USDA announced another flash sale of 204k tons (8 million bushels0 of old crop corn to China. Announced sales to China/unknown this week have now reached 453 tons or 8 million bushels126 million bushels. Cumulative sales the past 3 weeks reached 126 million bushels. This is what traders expected seeing exports rebound with the competition supplies are low and the US corn price is the cheapest in the world. This morning’s Export Sales will be interesting. National average corn basis has firmed roughly 6 cents per bushel since March 1st as buyers start to round up the cash corn to meet 110 million bushels of known old crop export business is announced under the daily system since the China buying spree began. While 25% of the state is reporting surplus moisture, NASS reported that 7% of the Mississippi corn crop was planted as of March 26th, slightly ahead of the 5% average pace for that date. Brazilian winter corn crop planting is estimated at 96-97% completed. Remaining plantings will be outside the ideal growing season window and rely on scarce dry season rains to reach full yield potential. In the overnight electronic session the May corn is currently trading at 654 which is 3 ½ cents higher. The trading range has been 654 ¾ to 648 ¾.
On the Ethanol Front production improved to 1,001 tbd last week , up from 997 tbd the previous week. Corn usage at 101 million bushels was just below the weekly pace needed to reach the current USDA forecast of 5.250 million bushels. Do not expect the USDA to lower their corn for ethanol usage in the next WASDE report April 11th as the summer driving season kicking in. A train derailment carrying ethanol and corn syrup derailed and several cars erupted in flames, early this morning, sparking an evacuation for residents living near the crash site in Raymond, Minnesota, officials said. The Kandiyohi County sheriff’s office was notified about the train derailment about 1:00 A.M. local time. Around 22 rail cars “carrying mixed freight including ethanol and corn syrup” were reported to have derailed, BNSF Railway said in a statement. Several of the derailed tanks caught fire, the sheriff’s office said. There were no injuries or fatalities reported. We will keep you posted as the investigation evolves. There were no trades or open interest in ethanol futures.
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Sleep Walking. The Energy Report
By: Phil Flynn | March 30, 2023
There are more signs that the United States is sleep walking into an energy crisis and let’s hope the country wakes up before it is too late. Disturbing oil inventories that are showing signs of a major supply squeeze and a US foreign policy that is increasing geopolitical risk that increasingly emboldening our enemies are areas of concerns.
The latest outrage comes as Russia arrests a Wall Street Journal reporter. The reporter, Evan Gershkovich, was arrested in Yekaterinburg on suspicion of espionage. The Russians say they caught him red handed but the truth most likely is that Russia is going to use him as a political pawn. Who can forget that the Biden administration traded convicted Russian arms dealer Viktor Bout, to secure the release of a American held by Russia, Brittney Griner. Biden was unable to secure the release of Paul Nicholas Whelan the former United States Marine arrested in Russia on December 28, 2018, and accused of spying.
This comes as Russia is forming energy pacts with China and working more closely with Saudi Arabia.
US petroleum supplies took a big hit yesterday as refiners started to raise output. After Tuesday’s big surge in prices, the crack spread traders adjusted their trades to focus on gasoline supplies that are too tight.
Ongoing dispute over oil supply between Kurdistan and Iraq is causing some oil companies in the Kurdistan region to shut down production after Turkey halted Iraq’s northern oil exports in response to an international arbitration ruling. Now, while a lot of that oil is going into storage, if this gets resolved soon it will put downward pressure on the market.
This becomes a backdrop of what is going to be a new season of big petroleum supply draws in the coming weeks. Yesterday the Energy Information Administration (EIA) reported a massive 7.5 million barrels crude drop from the previous week. More than likely based on trends we’re going continue to see major crude oil supply drops in the coming weeks.
Part of the reason for that is refiners are coming out of maintenance and the fact that demand for fossil fuels around the globe is surging. The EIA reported refineries operated at 90.3% of their operable capacity last week. They are responding to surging gasoline crack spreads and raised gasoline production to 10.0 million barrels per day. Total petroleum demand increased to a healthy 20,476 barrels a day and despite the refiners’ best efforts, product supply did not increase. The EIA reported that total motor gasoline inventories decreased by 2.9 million barrels from last week and are about 4% below the five year average for this time of year. Distillate fuel inventories increased by 0.3 million barrels last week and are still 9% below the five year average for this time of year.
Refiners can’t focus as much on the diesel shortfall as the market is screaming for more gasoline supply. Yet there are signs that diesel is going to remain tight because of tightness of heavy crude.
Irina Slav at Oil Price wrote that heavy crude oil traditionally trades at a significant discount to lighter and sweeter grades, but the price of heavy crude is climbing. The main factor driving the uptick in heavy crude prices is a new mega-refinery in China which has contracted at least 8 million barrels of heavy crude. As well as China’s mega-refinery, constrained supply from Venezuela and Ecuador and the end of refinery maintenance season in the U.S., are pushing prices higher.
The DEMOCRAT-GAZETTE reported that, “Oil companies offered a combined $264 million Wednesday for drilling leases in public waters off the Gulf of Mexico in a sale mandated by last year’s U.S. climate bill compromise. The auction was the first in the Gulf in more than a year and drew interest from industry giants including Exxon Mobil, Shell and Chevron. Development of the auctioned leases is estimated to produce more than 1 billion barrels of oil and more than 4 trillion cubic feet of natural gas over 50 years, according to a federal analysis. But burning the oil is forecast to increase planet-warming carbon dioxide emissions by tens of millions of tons, the analysis found, drawing renewed ire from environmentalists. On the same day of the auction, the Biden administration announced plans to expand offshore wind resources powering millions of homes.
The Department of Interior’s oil and gas lease auction comes two days before a deadline set last year by climate legislation within the Inflation Reduction Act, which Biden signed into law after clinching support from West Virginia Democratic Sen. Joe Manchin, a fossil fuels industry supporter. To help get Manchin’s approval, the act prohibited leasing public lands for renewable power unless tens of millions of acres are first offered for fossil fuels. The climate law also raised the royalty rate companies must pay on oil they produce. The Biden administration set the rate for Wednesday’s sale at the maximum allowed — 18.75%, versus 12.5% historically — yet that did not appear to curb interest. The parcels auctioned Wednesday cover 114,000 square miles; an area larger than Arizona. Like past auctions of similar magnitude, only a fraction of the available acreage — about 2,600 square miles — received bids.
Bloomberg News reports, “After years of wrangling, the world’s most important oil price is about to be transformed for good, allowing crude supplies from west Texas to help determine the price of millions of barrels a day of petroleum transactions. The shift is because the existing benchmark, Dated Brent, is slowly running out of tradable oil for it to remain reliable. As such, its publisher S&P Global Commodity Insights — better known by traders as Platts — has been forced to make a dramatic overhaul. Its switchover was fraught with controversy and caused a lot of stress among physical oil traders. But it was necessary. BP Plc at one stage said that Dated Brent was subject to “increasingly regular dislocations. ”But the future of Dated is now set. From cargoes for June onward, West Texas Intermediate Midland, oil from the Permian will become one of a handful of grades that set the Dated benchmark.” Must read.
Smart hedgers are putting on positions right now. With the global economy seemingly stabilizing and signs that Chinese demand is going through the roof, there is significant upside risk in the price of oil and products from this point going forward. The seasonality for oil is also very bullish. Moore Research points out that the price of September crude between March 29th and April 14th has gone up 14 out of the last 15 years for an average profit of $3175.
Natural gas weakness is apparent. With the exports hampered by the shutdown of the Freeport LNG export terminal caused supply to back up. Supply had increased in anticipation of more LNG Exports. The EIA reported that U.S. natural gas production grew by 4% (4.9 billion cubic feet per day [Bcf/d]) in 2022, averaging 119 Bcf/d. Three regions—Appalachia, Permian, and Haynesville—accounted for 60% of all U.S. production in 2022, similar to the proportion in 2021. The most comprehensive measure of U.S. natural gas production that we collect is gross natural gas withdrawals.
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Agriculture Master Report
By: Bill Moore | March 29, 2023
MAY CORN
China has embarked on a very aggressive buying program – making Flash 8am buys of US Corn 10 of the last 11 trading days – totaling over 3MMT – which has rallied the May Corn 40 cents (610-650)! We expect this buying frenzy to continue – as US Corn is very competitive in the South American Mkt! The major headwind in all commodities besides the inflation/IR fight by the Fed is the recent banking crisis – which has seen 2 US banks close – but that seems to have stabilized – and Corn has gone up regardless! The USDA Planting/Qtly Stks Mar 31 report this Friday should reflect 2.4 MA more than 2022! Arg/Brzl is about ¾ done! The Argentine drought has generally tightened carry-over – putting much pressure on the US!
MAY BEANS
May Beans have been weighed down by “negative Macros” – including the INFLATION/IR conundrum faced by the Fed & the closure of 2 US banks in the past week! but in the last 3 days, the mkt has come alive – seemingly responding more to its own supply/demand fundamentals than the outsides! The result has been a stunning 60 cent rally 1405-1465! The mkt sees that Argentina has a half crop, that its 2023 acres are about the same as last year, that the US Growing season may begin with planting delays & that exports will improve! All of this with a back-drop of tighter – not more abundant – carryover stocks – will make bean futures very upward-sensitive to any US weather issues this coming growing season!
MAY WHT
Russia has basically owned the Wht Mkt in the past 4-5 months – inundating the global marketplace with very cheap exports from their record crop to help finance their war with Ukraine! But now, all of a sudden, they think wht is too cheap, globally & they’re talking about limiting exports or putting surcharges on them! That mentality – coupled with the ongoing uncertainty regarding the Russian-Ukraine Corridor Pact & substandard Winter Wheat ratings issued Mon – have a generated an impressive 40 cent rally (655-705) in May Wht! And the forecast acreage increase of 3.5 MA may not come to fruition – further enhancing the rally potential from today’s levels!
APL CAT
After correcting $6.00 (166.50 – 160.50), Apl Cat have come roaring back with a $4.50 rally – on the strength of lesser production & the onset of the Spring Barbeque Demand season! Beef production for the 2nd Qtr is expected to be down 6.2% from 2022 & also down 210 million pounds from the 1st Qtr – only the 2nd decline in the last 20 years! And the June cattle especially stands out – being a significant discount to cash & leaving a small upside gap on its daily chart! OLD BULL MKTS DIE HARD!
APL HOGS
Maybe this time! It looked for all the world that April Hogs spike low at 81.27 on 2/7 would hold but not to be! But the 75.12 spike on 3/23 appears to be the real deal – as the technicals are supported by solid fundamentals this time! Second Qtr production is due to be under 2022 & also 455 million pounds under the First Qtr – t75.1he 3rd largest drop in history! The mkt rallied $5.00 after hitting 75.12 last week! And the best demand period of the year is right around the corner! Roll out those grills!
On Thursday, the USDA will provide more info with a 2pm release of the Qtly Pig crop Report – total hogs, kept for breeding & kept for mktg are expected to be about the same as a year ago!
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Today's Futures Heat Map • Strongest: Orange Juice, Natural Gas, Palladium, Nasdaq 100 E-Mini
By: Barchart | March 29, 2023
• Today's Futures Heat Map
Strongest: Orange Juice, Natural Gas, Palladium, Nasdaq 100 E-Mini
Weakest: Heating Oil, Coffee, Gasoline, Japanese Yen
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Deliveries on Energies & Metals
By: The PRICE Futures Group | March 29, 2023
• Fri Mar 31st is Last Trading Day for April Heating Oil and RBOB.
• Fri Mar 31st is First Notice Day for April Metals.
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Buckle Up Your Chinstrap. The Corn & Ethanol Report
By: Daniel Flynn | March 29, 2023
We kickoff the day with MBA 30-year Mortgage Rate, MBA Mortgage Market Index, MBA Mortgage Refinance Index, MBA Purchase Index, and MBA Mortgage Applications at 6:00 A.M., Fed Barr Testimony and Pending Home Sales MoM & YoY at 9:00 A.M., EIA Energy Stocks at 9:30 A.M., 2-Year FRN Auction and 17-Week Bill Auction at 10:30 A.M., 7-Year Note Auction at 12:00 P.M., and Dairy Products Sales at 2:00 P.M.
On The Corn Front we had market corrections with soybeans and soybean meal ahead of Friday’s Grain Stocks and Prospective Plantings that will set the tone early in the planting season. We saw most grains higher except old crop corn with short covering. While livestock consolidated with inside days in both cattle & hogs. The $60 thousand dollar question is the decision of farmers to acreage this year. Farmers around the Corn Belt are anticipating a big year with corn, especially with improving soil moisture in corn-deficit areas while cash prices remained strong with corn to ethanol use, it will be interesting what what the Prospective Plantings will show. Michelle Rook with AGWEB quoted Kevin Paap. A Garden City, Minnesota farmer said, “There’s big demand with corn in our area, and we’re seeing the corn basis much more attractive than the soybean basis,” he continued, “corn yields have been maybe a little have been maybe a little better compared with soybeans, so I think corn is going to see the push.” The Prospective Plantings always have a wrinkle, but weather, exports, tar spots, and global demand will sake out the rally to the upside. In the overnight electronic session the May corn is currently trading at 652 ½ which is 5 ¼ cents higher. The trading range has been 653 to 645 ¾.
On the Ethanol Front the USDA’s Commodity Credit Corp. announced on March 20th that it does expect to purchase and sell sugar under the Feedstock Flexibility Program for crop year 2022, which runs through Oct !, 2022 through September 30, 2023. The CCC is required to announce quarterly estimates of sugar to be purchased for the FFP based on crop consumption forecasts. Under Federal law processors of sugar beets and domestically grown sugarcane can obtain USDA loans when harvest begins. The loans provide interim financing so that commodities can be stored after harvest, when prices are typically low, and be sold later, when prices are higher. When the nine-month loan matures, the processor can repay the loan in full or forfeit the collateral sugar to the USDA. The FFP was reauthorized in a 2018 Farm Bill as an option to avoid for forfeiture. The program encourages the domestic production of certain biofuels from surplus sugar. The USDA sold surplus sugar to bioenergy producers under the program. In its announcement, the CCC said that the USDA’s March 8th World Agriculture Supply and Demand Estimates report project the crop year 2022 (fiscal year 2023). US ending sugar stocks are unlikely to lead to forfeitures. Therefore, the USDA does not expect to purchase and sell under the FFP on or before July 1st2023. This makes me sense we will have food shortages because of US ethanol rather than sugarcane. Brazil is pushing away from sugar to corn which has me thinking we will have shortages in both corn & ethanol. There were no trades or open interest in ethanol futures.
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Grains Report: Wheat, Rice, Corn and Oats, Soybeans
By: Jack Scoville | March 29, 2023
• WHEAT
General Comments: Wheat markets were higher yesterday on short covering tied to ideas that the world economy has passed its worst test with the banking problems. Kansas City and Minneapolis were strong, but Chicago rallied late in the day to close with much more modest gains. Prices are still so cheap that Russia is reportedly thinking about increasing export tariffs or halting exports for a time to rally prices. The rally might be curing those ideas but the world price is still cheap when compared to US futures prices. Reports say that Russian offers continue to hit the world market and world prices are still weaker. Trends turned sideways to up on the daily charts. Ideas that big Russian offers and cheaper Russian prices would be a feature for a while in the world market was the driving force for the weaker prices, and price weakness could continue. Ideas are that both Australia and Russia are harvesting record to near record Wheat crops this year. The demand for US Wheat in international markets has been a disappointment all year and has been hindered by low prices and aggressive offers from Russia.
Overnight News: The southern Great Plains should get mostly dry conditions. Temperatures should be below normal. Northern areas should see isolated showers. Temperatures will average below normal. The Canadian Prairies should see mostly dry conditions. Temperatures should average below normal.
Chart Analysis: Trends in Chicago are mixed. Support is at 675, 654, and 648 May, with resistance at 712, 720, and 738 May. Trends in Kansas City are up with objectives of 883 and 945 May. Support is at 853, 843, and 823 May, with resistance at 878, 898, and 904 May. Trends in Minneapolis are up with objectives of 882 and 888 May. Support is at 860, 846, and 833 March, and resistance is at 892, 8910, and 928 May.
• RICE:
General Comments: Rice was mixed, with nearby months lower and deferred months higher. Trends are still up on the charts. It looks like some speculators are leaving the market or bear spreading in case of a bullish surprise on the reports coming on Friday. Demand has been good from domestic sources and offers seem hard to find right now. Export demand has been uneven and was low last week. Export demand has been an issue for the market all year. Mills are milling for the domestic market in Arkansas and are bidding for some Rice. Markets from Texas to Mississippi are called quiet. Demand in general has been slow to moderate for Rice for exports. Planting is active in Texas and southern Louisiana.
Overnight News: The Delta should get mostly dry conditions. Temperatures should be near o below normal.
Chart Analysis: Trends are mixed to up with objectives of 1832 May. Support is at 1760, 1749, and 1724 May and resistance is at 1800, 1820, and 1831 May.
• CORN AND OATS
General Comments: Corn closed a little higher yesterday as much improved export demand continued. Demand from China and unknown destinations has greatly increased in the last two weeks. The USDA export sales report was a marketing year high and the third highest sales amount in the last 20 years. Oats were higher and trends remain up in this market. US prices are currently very competitive with those from South America as Brazil concentrates on Soybeans exports and not Corn and US demand has improved because of the price differentials and the lack of a Brazil offer into the market. This trend should continue for the next few months if not longer. Prices from South America should now remain strong as countries there concentrate on Soybeans exports and not Corn. The Brazil Summer crop and the Argentine crop is developing under stressful conditions. It has been wet so the Soybeans harvest has been delayed and the Safrinha Corn planting is becoming delayed as well. These delays continue, but the harvest of Soybeans and the planting of Corn is now progressing well. Brazil sources say that 20% of the Winter crop could be planted outside of the ideal window so yields could be hurt in the end. NOAA is forecasting that La Nina will develop this Summer and replace El Nino. US growing conditions are usually good when this happens. However, it is very wet now and some early planting has been delayed.
Overnight News: China bought 204,000 tons of US Corn
Chart Analysis: Trends in Corn are up with objectives of 651, 663, and 681 May. Support is at 638, 628, and 625 May, and resistance is at 652, 660, and 668 May. Trends in Oats are up with objectives of 383 and 400 May. Support is at 367, 362, and 356 May, and resistance is at 382, 388, and 394 May.
• SOYBEANS
General Comments: Soybeans the products were higher yesterday on follow through speculative short covering tied to oversold conditions. The trends are mixed in these markets. Reports from Brazil show that basis levels there are under pressure due to the large crop being harvested now. Private analysts say the harvest there is now 70% complete. However, the basis might get higher later in the marketing period as total South American production is probably about the same as last year. Brazil has a very good crop, but the additional Soybeans grown in Brazil will be wiped out by the losses in Argentina. Argentina has been forced to import from Brazil to keeps its crushing facilities operating. Soybeans export demand is flowing to Brazil now. It remains hot but rains are reported in Argentina and crop conditions are getting stable. Forecasts from NOAA for very good growing conditions in the Midwest were also a factor, but there is too much rain in most growing areas right now.
Overnight News:
Chart Analysis: Trends in Soybeans are mixed. Support is at 1445, 1432 and 1415 May, and resistance is at 1478, 1500, and 1516 May. Trends in Soybean Meal are mixed. Support is at 447.00, 435.00, and 422.00 May, and resistance is at 461.00, 467.00, and 475.00 May. Trends in Soybean Oil are mixed. Support is at 5390, 5130, and 5000 May, with resistance at 5600, 5810, and 5980 May.
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Softs Report: Cotton, OJ, Coffee, Sugar, Cocoa
By: Jack Scoville | March 29, 2023
• COTTON
General Comments: Cotton was sharply higher on ideas that the world economic problems were fading into the background. Chart trends turned mixed. The weekly export sales report showed good demand, and demand ideas are improving. Demand has been ramping up for the last couple of months but fell off. Some ideas that demand could soon increase more as China has opened its economy. China has also started buying again from Australia after refusing imports from that country for political reasons.
Overnight News: The Delta will get mostly dry conditions and near to below normal temperatures. The Southeast will see scattered showers and near to below normal temperatures. Texas will have mostly dry conditions and below normal temperatures. The USDA average price is now 80.27 ct/lb. ICE said that certified stocks are now 1,485 bales, from 1,485 bales yesterday.
Chart Trends: Trends in Cotton are up with objectives of 8260, 8770, and 9910 May. Support is at 80.30, 79.80, and 77.90 May, with resistance of 82.50, 83.70 and 84.60 May.
• FCOJ
General Comments: FCOJ was a little lower yesterday in correction trading. Trends remain up in the market. Futures remain supported by very short Orange production estimates for Florida. Demand is thought to be backing away from FCOJ with prices as high as they are currently. Historically low estimates of production due in part to the hurricanes and in part to the greening disease that have hurt production, but conditions are significantly better now with scattered showers and moderate temperatures. The weather remains generally good for production around the world for the next crop including production areas in Florida that have been impacted in a big way by the two storms seen previously in the state. Brazil has some rain and conditions are rated good. Brazil continues to export to the EU and is increasing its exports to the US. Mexico is also exporting to the US.
Overnight News: Florida should get isolated showers. Temperatures will average near to above normal. Brazil should get scattered showers and near normal temperatures.
Chart Trends: Trends in FCOJ are up with objectives of 264.00 May. Support is at 245.00, 240.00, and 234.00 May, with resistance at 260.00, 263.00, and 269.00 May.
• COFFEE
General Comments: New York closed lower again yesterday, and London closed higher as trends remain up on the daily charts for London. The lack of offers from South America and Vietnam is still affecting prices and reports indicate that demand for Robusta from Vietnam is strong and increasing due to cost differentials with Arabica. Differentials are now weakening in Brazil, Honduras, and Colombia, but reports indicate that differentials might start to firm up again as production ideas are low for Colombia and Brazil. Ideas of big production for Brazil continue due primarily to rains falling in Coffee production areas now. Vietnam is estimated to have very good production this year due to a good growing season. There are other ideas that production potential for both countries has been overrated. The weather in Brazil is currently very good for production potential but worse conditions seen earlier in the growing cycle hurt the overall production prospects as did bad weather last year. Vietnam is getting less rain now to aid harvest progress but volumes offered have not increased.
Overnight News: ICE certified stocks are unchanged today at 0.747 million bags. The ICO daily average price is now 169.80 ct/lb. Brazil will get isolated showers in southern areas with above normal temperatures. Central America will get mostly dry conditions. Vietnam will see isolated showers.
Chart Trends: Trends in New York are mixed. Support is at 171.00, 170.00, and 167.00 May, and resistance is at 180.00, 184.00 and 190.00 May. Trends in London are up with objectives of 2270 May. Support is at 2140, 2090, and 2050 May, and resistance is at 2250, 2270, and 2300 May.
• SUGAR
General Comments: New York and London closed higher again, and the trends are up in New York and in London on the daily charts. Supplies are tight. Indian production is thought to be less than 33 million tons this year as mills are closing early there and Thailand mills are also closing earlier than expected so the crop there might be less. Brazil production is solid this year. Reports from private analysts suggest that Brazil can have a 13% increase in center-south production. Brazil producers are currently active in the futures market placing hedges on the production. European production is expected to be reduced again this year. Some analysts now say that Chinese production could be the lowest in six years due to bad growing conditions.
Overnight News: Brazil will get isolated showers in southern areas. Temperatures should average above normal. India will get mostly dry conditions and near to above normal temperatures.
Chart Trends: Trends in New York are mixed to up with objectives of 2160, 2170, and 2210 May. Support is at 2100, 2070, and 2040 May and resistance is at 2140, 2160, and 2170 May. Trends in London are up with objectives of 627.00 May. Support is at 608.00, 600.00, and 594.00 May and resistance is at 621.00, 624.00, and 627.00 May.
• COCOA
General Comments: New York and London closed higher again yesterday, but New York May closed slightly lower. Trends remain up for at least the short term. Talk is that hot and dry conditions reported in Ivory Coast could curtail mid-crop production, and main crop production ideas are not strong. Ivory Coast exports are now 1.7857 million tons down 1.5% from last year. Those ideas changed a little over the previous weekend due to heavy rains reported in Cocoa areas of the country. Ghana has reported a disease in its Cocoa to hurt production potential there, but overall production expectations are high. The rest of West Africa appears to be in good condition. Good production is reported for the main crop and traders are worried about the world economy moving forward and how that could affect demand. The weather is good in Southeast Asia.
Overnight News: Isolated showers are forecast for West Africa. Temperatures will be near normal. Malaysia and Indonesia should see scattered showers. Temperatures should average near normal. Brazil will get isolated showers and near to above normal temperatures. ICE certified stocks are lower today at 5.233 million bags.
Chart Trends: Trends in New York are up with objectives of 2960 May. Support is at 2850, 2820, and 2780 May, with resistance at 2920, 2960, and 2990 May. Trends in London are mixed to up with objectives of 2170, 2180, and 2220 May. Support is at 2100, 2070, and 2030 May, with resistance at 2160, 2200, and 2230 May.
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The Biggest Gouger. The Energy Report
By: Phil Flynn | March 29, 2023
Governor Gavin Newsom of California is the world’s biggest energy price gouger. While his state suffers with some of the highest energy bills and energy taxes in the country, the governor touted what he called a price gouging bill that he called, “the strongest state level oversight and accountability measures on big oil in the nation.” The reality is his bill is going to gouge the public with higher prices and less reliable supply.
The legislation is designed to combat climate change and forms a new government watchdog group that would force new reporting requirements from oil refineries. A lot of the data that they’re going to be asking for already exists but if it makes you feel better, it will also cost the taxpayers more money. They also say that the legislation is going to protect neighborhoods and schools from oil drilling. The governor boasted, “California took on big oil and won”. But the losers are going to be the people of California.
California’s energy infrastructure is an embarrassment to the country. Instead of being reliable and cheap it’s become expensive and oppressive to the poor and the middle class. Now with moves in California to ban natural gas, the economy of California is going to be damaged for years to come. Jobs and businesses will flee the state because to have a viable economy you must have a viable, reliable energy source. You also must have an energy source that is reasonably priced. That’s not happening in California. So, if you don’t leave the state for the crime you can lead the state because energy is unaffordable.
Government governor Newsom favors windfall profit taxes on energy companies. Yet trying to understand what a windfall profit is shows that the governor has little regard to economics. it also is a failure to understand the boom-and-bust nature of the energy industry and the amount of capital it takes to provide reliable and reasonably priced supplies.
Yet perhaps Governor Newsome should look across the pond to see the negative impact that windfall profit tax is having in Europe.
The Guardian reports that” The impact of windfall taxes on North Sea oil and gas exploration has turned out to be every bit as disastrous as critics predicted. More than 90 per cent of offshore firms are cutting investment, driven away by a raid on profits and the uncertain future caused by political meddling.
Successive governments such as the UK, in pursuit of “net zero”, have deliberately presided over the decline in North Sea extraction to reduce the UK’s carbon emissions while switching to renewables. However, oil and gas are still needed, and were being imported reasonably cheaply until the Ukraine war changed the economics completely. The surge in prices inevitably pushed up the profits of the energy companies, such that politicians felt compelled to tax them more. A report from Offshore Energies in the UK says this has driven away billions of pounds needed to maintain domestic oil and gas production.
The cuts mean the UK’s potential oil and gas resources have been downgraded, with 500 million barrels less likely to be produced – enough to support the nation for six months. This will just make Britain more dependent on imports. Indeed, as domestic production declines in the UK, overall reliance on oil and gas has increased.
As concerns about a global banking meltdown ease, fears of an oil and product supply shortage rise. The American Petroleum Institute (API) in their report last night showed how quickly things can change when it comes to the perception of ample supply. The API showed that crude oil supply fell by 6.076 million barrels. There was also a substantial 5.8918-million-barrel drop in gasoline. Distillates fell by a modest 548,000 barrels.
I would expect that the Energy Information Administration is going to show similar data showing big draws in crude and product supplies. We’re going to get into a period where the supplies could tighten significantly and that is one of the reasons why prices are significantly higher today.
Energy Secretary Jennifer Granholm is also suggesting that maybe, just maybe, she was wrong about the Strategic Petroleum Reserve. The Energy Secretary previously put downward pressure on the oil market by suggesting that the SPR would not buy back any oil this year, but she changed her mind on that and now there is a possibility that they could buy some oil back later this year. Reuters reported that Granholm told Reuters during a visit to Puerto Rico that purchases could begin late in 2023. “We will begin that process this year but to refill the full amount is impossible to do in one year,” Granholm said. Reuters says that the department is conducting a 26-million-barrel SPR sale mandated by Congress and two of the four SPR sites in Texas and Louisiana are down for maintenance, both of which have delayed buy-backs.
I say one of the biggest issues that’s going to come back to haunt the Biden administration is the misuse of the SPR. When oil prices start to spike, as we fully expect they will, there is going to be a lot of questions as to why the Biden administration used the SPR to try to control prices which hurt production and helped contribute to what a coming supply shortfall is. Oh, I am sure he will blame the energy companies or he will blame Vladimir Putin or he will blame the man in the moon.
The ongoing dispute between Kurdistan and the Iraqi government continues and that is keeping about 400,000 barrels a day of oil off the market. If this standoff continues, it’s going be a bigger and bigger issue. The world can’t just lose 400,000 barrels of oil a day especially as the US refiners are kicking into high gear for the summer drive season.
Physical product demand for both oil and gas are extremely strong. Sources that I’ve talked to at different terminals are seeing the demand for diesel and gasoline as strong and higher than it’s been in some time. Seasonally, technically and fundamentally oil and products look poised for a big rally.
Natural gas on the other hand continues to struggle. Below normal temperatures for this time of year doesn’t seem to be enough to support the market that is in the heart of shoulder season.
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Why Buy DBA: Agricultural Fund ETF?
By: Mish Schneider | March 28, 2023
Last week, I tweeted:
I believe the #commodities prices in food softs $DBA have bottomed. $GLD-well those who know me-that I pointed out bottomed months ago. $SLV now outperforming. That tells you something. Maybe even #oil. Get ready for the Commodities Super Cycle.
If you are not following me @marketminute on twitter, you should consider doing so, as I often make such comments or point out specific trades.
Technically, the charts were already setting up for a buy in the individual grains. We decided to focus on DBA.
Fundamentally, we have geopolitical issues, as we know. I also talk about sugar, which still rocketing in price, a lot. Now weather is becoming an additional factor. I read today that Russia is refusing to sell wheat below $275 a ton, which, combined with failing HRW wheat in the plains and Southwest US and heavy snowpack in the northern plains, means supply could get even tighter.
DBA tracks an index of 10 agricultural commodity futures contracts. It selects contracts based on the shape of the futures curve to minimize contango. Specifically, the underlying index includes corn, soybeans, wheat, Kansas City wheat, sugar, cocoa, coffee, cotton, live cattle, feeder cattle, and lean hogs. And there is a K-1 to investors.
Basically, you get great exposure to lots of commodities.
Technical Analysis:
The first chart shows the Triple Play Leadership indicator, or how DBA is performing against the benchmark.
The price chart of DBA shows the 200-DMA above the 50-DMA, or an accumulation phase according to our six market phases. On Tuesday, the price cleared the 200-DMA, closing .40% higher. On the Leadership charts, DBA poke its head out above the benchmark to show it is now outperforming the SPY.
The second chart shows our Real Motion Indicator or momentum. Here's where things get real interesting.
The 50-DMA is ABOVE the 200-DMA. Momentum is in a bullish phase. Furthermore, the red-dotted line, or measure of momentum, cleared both MAs and the black horizontal line or zero point. Bullish momentum and a divergence with the price chart showing the 50-DMA below the 200-DMA.
What does this all mean? Seasonally, we are entering the make-or-break time for crops. Inflation-wise, food prices continue to escalate. In the U.K., grocery inflation rose again in March to a record 17.5%.
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Deliveries Metals & Energies
By: The PRICE Futures Group | March 28, 2023
• Wed Mar 29th is Last Trading Day for March Metals and April Nat Gas.
• Fri Mar 31st is Last Trading Day for April Heating Oil and RBOB.
• Fri Mar 31st is First Notice Day for April Metals.
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Today's Futures Heat Map • Strongest: Cotton, Soybean Meal, Sugar, Soybean
By: Barchart | March 28, 2023
• Today's Futures Heat Map
Strongest: Cotton, Soybean Meal, Sugar, Soybean
Weakest: Lumber, Pork Cutout, Coffee, Natural Gas
It's a rare day when Nat Gas doesn't show up among the weakest
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Buyers Beware. The Corn & Ethanol Report
By: Daniel Flynn | March 28, 2023
We start the day with Goods Trade Balance Adv, Retail Inventories Ex Autos MoM Adv, and Wholesale Inventories MoM Adv at 7:30 A.M., Redbook YoY at 7:55 A.M., S&P/Case-Shiller home Price MoM & YoY, House Price Index MoM & YoY, and House Price Index at 8:00 A.M., CB consumer Confidence, Fed Barr Testimony, Richmond Fed Manufacturing Index, Richmond Fed manufacturing Shipments index, and Richmond Fed Services Index at 9:00 A.M., Dallas Fed Services Index and Dallas Fed Services revenues Index at 9:30 A.M., 5-Year Note Auction at 12:00 P.M., and API Energy Stocks at 3:30 P.M.
On the Corn Front prices surged to their highest level in 1 month, however, could not punch through resistance of the 50-Day Moving Average at 656 ½ while the 100-Day Moving Average is 660. The USDA reported a private export sale yesterday of 112,000 MT of old crop corn to unknown destinations. Weekly Export Inspections data showed 666,325 MT of corn was exported during the week ended March 23rd. This was down from 1.19 MMT last week and was only 41% of the same week last year. Mexico was the top importers for the week. The USDA had the season’s total shipment at 18,194 MMT, compared to 20.045 MMT last year. The US export market is picking up for old crop but new crop is minimal. As we move ahead in planting season with concerns of tar spots or the official name of Phyllacora maydis may concern buyers for new crop US corn. This is a reality of global shortages concerns. The key for the moment is Fridays Prospective Plantings and traders wondering what acreage that could suffer from the tar spot disease, this could be a telling sign for US exports in the future. An old friend of mine and awesome grain trader reminded me, “it is not what you plant but what you grow.” Weather with rains leaving wet leaves on corn and moderate temperatures will have this fungi playing a part in what farmers, importers, and traders think. If we have ideal growing conditions it should be a non-factor, but weather in South America and the US will be a gamechanger in the near future. In the overnight electronic session the May corn is currently trading at 648 which is a ¼ of a cent lower. The trading range has been 648 ¼ to 644 ½.
On the Ethanol front the US Department of Commerce’s International Trade Administration has announced its Renewable Energy and Energy Efficiency Advisory Committee will hold a hybrid meeting on April 4th in Washington, D.C. The REEEAC provides the Department of Commerce with advise from the PRIVATE SECTOR on the development and administration of programs and policies to expand the export competitiveness of U.S. renewable energy and energy efficiency products and services They have a lot of work ahead of themselves to find renewable energies that focuses on technologies, equipment, and services to generate electricity, produce heat, and power vehicles from renewable sources, such as solar, wind, biomass, hydropower, geothermal and hydrogen. If this is going to work the private sector as always will make it work. However, don’t give up on internal combustion engines yet. There were no trades or open interest in ethanol futures.
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Grains Report: Wheat, Rice, Corn and Oats, Soybeans
By: Jack Scoville | March 28, 2023
• WHEAT
General Comments: Wheat markets were higher yesterday on short covering tied to ideas that the world economy has passed its worst test with the banking problems. Prices are now so cheap that Russia is reportedly thinking about increasing export tariffs or halting exports for a time to rally prices. Reports say that Russian offers continue to hit the world market and world prices are still weaker. Trends turned sideways to up on the daily charts. The problem remains demand as world supplies are not so large and US inventories are less. Ideas that big Russian offers and cheaper Russian prices would be a feature for a while in the world market was the driving force for the weaker prices, and price weakness could continue. Prices are now so cheap that Russia is reportedly thinking about increasing export tariffs or halting exports for a time to rally prices. Ideas are that both Australia and Russia are harvesting record to near record Wheat crops this year. The demand for US Wheat in international markets has been a disappointment all year and has been hindered by low prices and aggressive offers from Russia.
Overnight News: The southern Great Plains should get mostly dry conditions. Temperatures should be below normal. Northern areas should see isolated showers. Temperatures will average below normal. The Canadian Prairies should see isolated showers. Temperatures should average below normal.
Chart Analysis: Trends in Chicago are mixed. Support is at 675, 654, and 648 May, with resistance at 712, 720, and 738 May. Trends in Kansas City are up with objectives of 883 and 945 May. Support is at 843, 823, and 810 May, with resistance at 878, 898, and 904 May. Trends in Minneapolis are up with objectives of 882 and 888 May. Support is at 860, 846, and 833 March, and resistance is at 882, 892, and 910 May.
• RICE:
General Comments: Rice was mixed, with nearby months a little lower and deferred months a little higher. Trends are still up on the charts. Ideas are that some selling from producers was seen on the rally early in the session and over the weekend as well. Demand has been good from domestic sources and offers seem hard to find right now. Export demand has been uneven and was low last week. Export demand has been an issue for the market all year. Mills are milling for the domestic market in Arkansas and are bidding for some Rice. Markets from Texas to Mississippi are called quiet. Demand in general has been slow to moderate for Rice for exports. Planting is active in Texas and southern Louisiana.
Overnight News: The Delta should get isolated showers. Temperatures should be below normal.
Chart Analysis: Trends are up with objectives of 1832 May. Support is at 1760, 1749, and 1724 May and resistance is at 1800, 1820, and 1831 May.
• CORN AND OATS
General Comments: Corn closed higher yesterday as much improved export demand continued. Demand from China and unknown destinations has greatly increased in the last two weeks. The USDA export sales report was a marketing year high and the third highest sales amount in the last 20 years. Oats were higher and trends remain up in this market. US prices are currently very competitive with those from South America as Brazil concentrates on Soybeans exports and not Corn and US demand could improve because of the price differentials and the lack of a Brazil offer into the market. Prices from South America should now remain strong as countries there concentrate on Soybeans exports, so the US has a chance now to see export demand improve. The Brazil Summer crop and the Argentine crop is developing under stressful conditions. It has been wet so the Soybeans harvest has been delayed and the Safrinha Corn planting is becoming delayed as well. These delays continue, but the harvest of Soybeans and the planting of Corn is now progressing well. Brazil sources say that 20% of the Winter crop could be planted outside of the ideal window so yields could be hurt in the end. NOAA is forecasting that La Nina will develop this Summer and replace El Nino. US growing conditions are usually good when this happens. However, it is very wet now and some early planting has been delayed.
Overnight News: China bought 136,000 tons of US Corn.
Chart Analysis: Trends in Corn are up with objectives of 651, 663, and 681 May. Support is at 638, 628, and 625 May, and resistance is at 649, 652, and 660 May. Trends in Oats are up with objectives of 383 and 400 May. Support is at 367, 362, and 356 May, and resistance is at 382, 388, and 394 May.
• SOYBEANS
General Comments: Soybeans the products were higher yesterday on speculative short covering tied to oversold conditions. The trends are still mostly down in this market. Reports from Brazil show that basis levels there are under pressure due to the large crop being harvested now. However, the basis might get higher later in the marketing period as total South American production is probably about the same as last year. Brazil has a very good crop, but the additional Soybeans grown in Brazil will be wiped out by the losses in Argentina. Argentina has been forced to import from Brazil to keeps its crushing facilities operating. Soybeans export demand is flowing to Brazil now. It remains hot but rains are reported in Argentina and crop conditions are getting stable. Forecasts from NOAA for very good growing conditions in the Midwest were also a factor, but there is too much rain in most growing areas right now.
Overnight News:
Chart Analysis: Trends in Soybeans are mixed to down with objectives of 1404 May. Support is at 1422, 1415 and 1405 May, and resistance is at 1455, 1478, and 1480 May. Trends in Soybean Meal are mixed to down with no objectives. Support is at 435.00, 422.00, and 405.00 May, and resistance is at 462.00, 454.00, and 461.00 May. Trends in Soybean Oil are mixed to down with objectives of 5050 May. Support is at 5150, 5000, and 4880 May, with resistance at 5500, 5600, and 5850 May.
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Hedging Their Bets. The Energy Report
By: Phil Flynn | March 28, 2023
In crisis there can be opportunity and good can come out of bad. While the drop in petroleum prices was predicated on fear surrounding the global banking crisis, it did provide an opportunity for users of petroleum. Users and producers of oil and petroleum products are starting to understand that this recent crash in oil products has been overdone. While banks and hedge funds and speculators flee, there are signs that hedgers, as we recommended, are stepping in.
Bloomberg News reported that Swap dealers posted their second-biggest increase in long positions in ICE Brent futures and options on record last week. The 54,000-contract surge was previously eclipsed only in 2018. Bloomberg pointed out that swap dealer positioning is often used as a proxy for producer and consumer hedging activity because it offers a glimpse into where entities dealing in over-the-counter transactions, such as banks, lay off risk into futures markets.
As I wrote before, the sell-off in oil was based upon more fear of contagion in the banking sector than any real supply or demand fundamentals with oil. Consumers such as airlines and big users of oil are starting to realize that the selloff in oil and products based upon supply and demand didn’t make any sense. This was all about the risk-off positioning as many hedge funds had to de-risk. While the market was trying to grasp just how bad the failure of Silicon Valley bank and the sale of Credit Suisse UBS would have on the overall market and what we might find out is that it could turn out to be more bullish for the market. The reason is that the banking cracks that have been seen will force global central banks to slow their rate of interest rate increases and that should allow oil demand to continued unfettered.
In a weird way the cracks in the global banking system may turn out to be bullish for oil because the Federal Reserve will have to be a lot less aggressive in trying to talk down oil prices because they realize that they could unleash more problems with the global banking system. Add that to the fact that inflation expectations have come down dramatically.
Dr. Ilia Bouchouev, the former President of Koch Global Partners, tweeted that, “Hedge fund sold 1.5x more barrels just in 2 weeks than the record SPR did in the entire year. The problem is when funds buy back their shorts, there will be no SPR to offset the buying pressure.
This comes on more signs that Chinas oil demand is coming back in a big way. Oil watcher Tim Dallinger pointed out that flights in China rose to 978,182, that’s up a whopping 291% from a year ago and just shy of the all-time high.
Bank lending for oil production may also slow. The FT reported yesterday that, “The fall in prices has been a wake-up call,” said Matt Bernstein, an analyst at Rystad Energy. Top publicly listed shale producers have locked in prices for only about 27 per cent of their output for 2023 at an average of approximately $66 a barrel, down from the more than 40 per cent of output that they hedged last year, according to data from Rystad. Some of the largest US producers, including Pioneer Natural Resources, EOG Resources and ConocoPhillips, have little to no price hedges in place for this year. Scott Sheffield, chief executive of Pioneer, defended the positions, saying the recent dip in crude markets “had nothing to do with the lack of oil demand” and that he was still “optimistic that we’ll see $100 a barrel before the end of the year”. “We’re not going to hedge,” he said in an interview.
Supply issues are going to come into play. French strikes are reducing supplies of refined product. Iraqi federal government and Kurdish officials failed to agree on the resumption of around 400,000 barrels a day of oil exports from a Turkish port, according to people familiar with the matter as reported by Bloomberg.
Overnight we’re hearing from the Russian energy minister who is saying that they expect oil and gas production to decline in Russia this year. Reuters reported that Russia’s energy minister said that the country had managed to successfully re-direct its oil exports to new markets, but that oil and gas production was expected to decline in 2023. Russia’s Deputy Prime Minister Novak said that Russia should seek to produce at least 100 million tons of liquefied natural gas per year by 2030.
Biden’s foreign policy is bringing people closer together, especially our enemies. China’s President Xi Jinping spent three days in Russia, solidifying his “no limits” partnership with Russian President Vladimir Putin. On Tuesday, Joe Biden kicks off his second Summit for Democracy — aiming to rally world leaders around principles of freedom, rule of law and human rights according to Politico.
Reuters is reporting that the governments of Iran and Saudi Arabia — Islamist rival states that recently agreed, under the auspices of China, to restore their diplomatic relations — announced on Monday that their foreign ministers would schedule a meeting during the Muslim holy month of Ramadan.
So the bottom line is that the outlook for oil and products is still very bullish, assuming that we do not see any more fallout from the banking crisis with the plot by the Fed being less aggressive. We believe that we’re in the perfect environment where we will see demand exceed supply.
Natural gas bulls need a shoulder they can cry on. The shoulder season is putting pressure on the natural gas market. This was one of the most promising markets a year ago but warmer than normal temperatures and the closing of the Freeport LNG terminal changed the fundamentals. Longer term the natural gas, if you look at the time spreads, project see higher prices in the future but right now that doesn’t help you if you’re on the front end of the curve. If you are on the back end of the curve, it is thin and there is not any option liquidity to help you hedge.
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Today's Futures Heat Map • Weakest: Natural Gas, T-Bonds, Gold, Coffee
By: Barchart | March 27, 2023
• Today's Futures Heat Map
Strongest: Crude Oil, Gasoline, Cotton, Heating Oil
Weakest: Natural Gas, T-Bonds, Gold, Coffee
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The Corn & Ethanol Report
By: Daniel Flynn | March 27, 2023
We kickoff the day with Dallas Fed Manufacturing Index at 9:30 A.M., Export Inspections at 10:00 A.M., 3-Month & 6-Month Bill Auction at 10:30 A.M., 2-Year Note Auction at 12:00 P.M., and Fed Gov. Jefferson Speech at 4:00 P.M.
On the Corn Front we closed higher on Friday in choppy trade. China continues to have a heavy appetite for US corn. With bad news and major concerns to acreage and yields the invasive fungal corn disease “tar spot” is spreading in South Central Pennsylvania in the coming is expected to expand across Pennsylvania in the coming season. Higher precipitation in the weeks leading to spring plantings has corn growers more concerned over the tar spot fungus. The disease can reduce yields from 20 to 100 bushels per acre. This disease attacks the leaf tissue and can rapidly deteriorates the plant. According to the Crop Protection Network, it is estimated that it caused farmers to lose $3 billion from 2018 to 2021 and has the potential to be more destructive in states that are now just seeing cases. The fungal pathogen that causes the disease survives over winter, meaning the disease won’t go away. “once you have it, you’re not going to get rid of it. It’s going to stay on corn residue in that field,” said Mandy Bish, integrated pest management coordinator at the University of Missouri. Since it’s early, farmers will wait to see how much of an effect tar spot will have in states where it’s just appearing. It thrives in mild temperatures and wet leaves. “Were learning some of those environmental conditions,” Bish said, “so we know that in 2018 and 2021 we really had bad outbreaks that caused significant yield loss, whereas in 2020 and 2022 the environmental conditions weren’t as favorable to the fungus. The spot moving across the Midwest and Great Plains according to a report from researchers at Kansas State University. The disease, which was present in Mexico, first appeared in Indiana and Illinois in 2015. Since then, it has spread to surrounding states- farmers spotted in Nebraska for the first time in 2021 and Missouri, Kansas and South Dakota last growing season. It’s spreading, I’d say, pretty quickly, throughout the Midwest and in corn production regions,” said Rodrigo Onefre, a plant pathology professor at Kansas State University. This will make the 2023 planting season extra important. And the US farmers feared many months ago food shortages, especially with Argentina and the Ukraine on the corn export sidelines. We can also watch Brazil’s second corn crop and see who can globally deliver the corn crop. Eva Tesfaye with Harvest Public Media contributed to the facts. In the overnight electronic session the May corn is currently trading at 642 which is 1 cent lower. The trading range has been 644 to 638 in the early going.
Ob the Ethanol Front the ethanol market size is expected to increase by USD 163.9 Bn by 2032/CAGR of 4.9%. The ethanol market refers to the global trade in ethanol, a biofuel that from renewable resources such as corn, sugarcane, and other agricultural products. Ethanol is a colorless and flammable liquid that is commonly used as a fuel additive to increase octane rating of gasoline reduce harmful emissions, and improve overall engine performance. The market is driven by the increasing demand for biofuels, growing awareness about the environmental benefits of ethanol, and then increasing demand for renewable energy sources. This the way to go other than electric which they will take away internal combustion engines, gas stoves, and our air-conditioners. The global ethanol market has been growing steadily over the past few years, driven by increasing demand for renewable energy and a shift towards more sustainable fuels. The market is dominated by a few major players, including Archer Daniels Midland, Green Plains Inc., and Valero Energy Corporation, which collectively account for a significant share of global ethanol production. There were no trades or open interest in ethanol futures.
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Banking On It . The Energy Report
By: Phil Flynn | March 27, 2023
Oil prices are trying to recover from the banking fiasco that divorced petroleum prices away from supply and demand fundamentals. Now with reports that First Citizens Bancshares Inc. has agreed to buy Silicon Valley Bank, and the fact that chairman of Saudi National Bank, Ammar al-Khudairy, the man that started a run-on Credit Suisse bank said that he is resigning for “personal reasons”, it might give oil and product prices a reason to rally as we prepare for another week where we should see supply in storage drop significantly.
Oil and petroleum products have been down on a crisis of confidence not based on current supply and demand fundamentals and that could do huge damage long term, not only to the production side of oil but the refining side as well. The banking crisis may create a situation where we see tighter supplies than we normally would have in the coming weeks and months.
On top of that Saudi Arabia, that has been pushed closer to China by the Biden Administration, has announced a major deal agreeing to buying a 10% stake in a Chinese oil complex. Bloomberg News reports that Saudi Aramco will spend $3.6 billion in a deal to expand its refining presence in China. Saudi Arabia also pledged at least 480,000 barrels a day of crude oil to the Rongsheng Petrochemical refinery for 20 years. This story will come as a huge disappointment to energy secretary Jennifer Granholm as well as other Biden administration officials who have been touting China as a leader in green energy transition.
The resignation of Ammar al-Khudairy at Saudi National Bank, reminds us that we have to be careful about what is said especially when it comes to international banking. Care must also be taken if your country holds a lot of money in a particular bank and you come out flatly and say absolutely not will you invest any more money if the bank gets in trouble. It kind of reminds me of Jane and Michael Banks and Mary Poppins. The only problem is I don’t think we’re going to see Mr. al-Khudairy flying any kites anytime soon.
We’re starting to see signs that confidence in the banking system is getting more solid even as concerns about which bank might be in trouble on Friday kept the market on edge. The bottom line is that the Federal Reserve is going to have to really reassess their messaging to the market as well as their interest rate increases to avoid more problems at regional and global banks.
Geopolitical risk factors are also supporting oil. China’s demand as well as the fact that Russia is going to put tactical nuclear weapons in Belarus is keeping the market on edge. Huge Chinese demand for oil and copper should keep those commodities very well supported. Reuters also reported that, “Iraq halted crude exports from the semi-autonomous Kurdistan region and northern Kirkuk fields on Saturday, an oil official told Reuters, after the country won a longstanding arbitration case against Turkey. The decision to stop shipments of 450,000 barrels per day (bpd) of crude relates to a case from 2014, when Baghdad claimed that Turkey violated a joint agreement by allowing the Kurdistan Regional Government (KRG) to export oil through a pipeline to the Turkish port of Ceyhan according to Reuters.
Bloomberg reports that, “Russia’s diesel exports are on course to hit a record this month despite European Union sanctions depriving the country of its biggest market. Moscow is so far shrugging off concern that the bloc’s recent import ban would force it to reduce exports amid a lack of alternative buyers. Instead, Turkey, Morocco and other nations have stepped up purchases — though some cargoes from Russia are also being held in floating storage.”
Natural gas looks weak. EBW analytics reports that, “The April contract repeatedly tested technical support last week, with intraday lows within a 2.5¢ range from $2.127-$2.152 from Tuesday to Friday. Supportive weather and a larger-than-normal EIA draw, however, proved sufficient to fend off downward pressure. A mildly bearish weekend weather demand loss and softening LNG feedgas demand prompted a swift retreat to the same level.
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What I'm Watching This Week In The Grain Markets
By: Barchart | March 26, 2023
We are now over halfway through the crop year for corn and soybeans and three quarters of the way through the wheat marketing year. As we talked about months ago, time is the only thing that provides answers to the questions we have at the start of the marketing year, especially when it comes to demand.
With this in mind, and the upcoming Planting Intentions and Quarterly Stocks update likely to be this week’s focus, I thought now would be a great time to give an update on old crop fundamentals and what that could mean for price as we head into the Northern Hemisphere growing season.
After what has felt like months of talk about poor corn exports, we are finally seeing the long awaited uptick in global demand for US products. Traders began to talk about the US being the cheapest, most reliable supplier for corn in December, expecting a sharp uptick in interest. However, the supply of Brazilian bushels combined with concern over global financial conditions provided a slow start to our export year.
The slow start and lack of interest—as well as a sharp cut in production expectations keeping domestic prices elevated--has pushed the USDA to cut export expectations by nearly 550 million bushels from August projections to March. Some traders will argue the market spends an inordinate amount of time debating corn exports as they are only 15% of the demand pie, but with relatively consistent domestic demand, corn exports become the driver in ending stock adjustments for the year, therefore are incredibly important to watch.
The USDA’s export update in their March report had exports down 621 million bushels from a year ago and looking at the sales differences to our top customers made it easy to see why. While Mexico’s purchases have remained relatively consistent year over year, sales to China at the start of the month were down 63% from last year, sitting at 4.5 mmt or 177 million bushels, versus the year prior total of 12.1 mmt or 476 million bushels. Sales to Japan were down 54%, 4 mmt or 157 million bushels lower as well.
Talk of reduced exports as well as worries over potential reductions in domestic demand with an anticipated recession and margins for feeding livestock pinched, combined with turmoil in the financial sector had speculators exit the corn market in a big way, dropping prices on the May contract nearly 80 cents from top to bottom in a matter of days. As they say though, low prices cure low prices, and the drop in value has helped to spur demand.
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China’s return to the US corn market has been welcomed in a big way, as they have managed to buy the most corn since May of 2021, purchasing just over 3 mmt or 118 million bushels in the last 3 weeks. Japan’s purchases have not gotten the attention China’s buys have, but they too have increased their buying pace significantly, adding 1.2 mmt during that same period of time.
This as well as a stronger than expected job market keeping gasoline demand higher than expected, has traders now anticipating the USDA will keep current projections for corn used for ethanol near this level as opposed to sharp cuts expected by some to start the calendar year.
All of this great news for what was viewed as an ailing market, helping to put a floor in place. At this point, the recent uptick in sales does not necessarily mean the USDA has to make big changes to demand projections coming up, barring a surprise from Quarterly Stocks next week, but it does mean a continuation of cuts to demand like we have seen recently should come to an end for the time being, stabilizing ending stock projections.
While the fundamental outlook for old crop corn has changed significantly with the return of China and Japan and a stabilizing ethanol production outlook, the situation in the soybean market appears to be moving in the opposite direction.
Soybeans have been the market that just would not go as gently into the good night as expected, not just this year, but for what feels like the last 3-4 years, as talk of big gains in domestic ending stocks got waylaid by upticks in demand, cuts to production or both these last several years.
Last year’s cuts to production in the US throughout the year combined with a slow start to the Brazilian bean export season has kept traders talking about the threat of sub 200 million bushel ending stocks for the last several weeks. As I discussed in my March 5th, 2023 article here on Barchart, the slow start to the Brazilian export season did not mean we would see a continuation of strong export demand from the US because their supplies would eventually make it into the global pipeline, possibly even working into the US in a big way.
The spread in prices between the US and Brazil has only grown since then, with Brazilian bean values losing 85 cents for May shipment since the start of March, moving the difference in price between the 2 countries to over $1.70/bushel. This spread has prompted at least 3 cargoes worth of beans to be traded into Eastern ports, while rumors of another 6 cargoes trading into the Gulf were present in the market Thursday and Friday. According to one well followed market analyst, upwards of 20 million bushels have been purchased for import in the last week or so, markedly changing the local supply and demand fundamentals in the regions where the beans will arrive.
In addition to talk of Brazilian beans arriving in the US we have around 1.5 mmt or 55 million bushels of beans committed to China but not yet shipped, with an additional 2 mmt (73 million bushels) of beans sold but not yet shipped to Unknown. While most like to assume Unknown is China when sales are announced, historical indications show that tends to be the case around half of the time, leaving an estimated 2.5 mmt of beans sold to China but not yet shipped.
With the economics so violently in favor of foregoing US purchases and bringing in Brazilian bushels, as well as rumors of crushers in China defaulting on much higher priced contracts, the worry is now rapidly hitting the market that we could not only outpace import expectations, but could fall short on demand projections, a situation we have not faced in soybeans in quite some time.
Of course, with the amount of open purchases unshipped in beans down significantly versus a year ago, some remain optimistic the bushels committed will ship, leaving us to watch export inspections closely in the weeks ahead.
This is an important exercise not only for beans, but for corn as well.
In other news, the fund sell off in wheat has left it wide open to a quick rush back into the market if we were to see any sort of supply scare develop. We got a big rally Friday on the back of Russian wheat export restriction rumors. At the end of the day though we discovered Russia has no intention of restricting exports, planning instead to work to keep a price floor under the market, trying to keep their farmers profitable.
Weather in many wheat producing areas remains suspect as well, with dry conditions in Europe, dry conditions in the Southern Plains, a variety of conditions in the Black Sea and feet of snow on the ground still in the Northern Plains as the calendar gets ready to turn to April. Wheat production is far from out of the woods, while cash values traded around the world and the depth of offers in tenders will remain key to watch in the weeks ahead.
Weather will be key when it comes to final acreage as a whole, with the market likely to excitedly trade acreage ideas this week ahead of the USDA’s Planting Intentions report. Trade expectations appear to put corn acres somewhere between 87.5 and 93 million acres, a range of nearly a billion bushels in subsequent production estimates using the USDA’s most recent trendline yield. The range of guesses for soybean acreage seems to fall between 86 and 90 million, a production range of around 200 million bushels using 50 bushel yields.
In the end, this week marks the unofficial kick off to the new crop supply and demand debate season in the face of changing old crop dynamics, meaning now’s the time we’re going to put the “fun” in fundamentals. I’ll have a summary of Friday’s USDA numbers next week and what they mean as we look ahead.
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Today's Futures Heat Map • Strongest: Wheat, Orange Juice, Hard Red Wheat, Coffee
By: Barchart | March 24, 2023
• Today's Futures Heat Map
Strongest: Wheat, Orange Juice, Hard Red Wheat, Coffee
Weakest: Copper, Cotton, Platinum, Palladium
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Deliveries Metals & Energies
By: The PRICE Futures Group | March 24, 2023
• Wed Mar 29th is Last Trading Day for March Metals and April Nat Gas.
• Fri Mar 31st is Last Trading Day for April Heating Oil and RBOB.
• Fri Mar 31st is First Notice Day for April Metals.
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Friday Bounce For Beans
By: Barchart | March 24, 2023
Soybean futures are trading up by 6 1/4 to 12 cents so far for Friday. The May contract is still down a net 50 cents for the week. Nearby soymeal futures are trading $4.70 to $5.90 higher so far. Soy oil prices are up by 88 to 108 points for midday. USDA saw the B100 cash price at $5.79/gal in IL this week, unchanged from last week.
Farm Futures survey results show 23.24 soybean area will be 89.621m acres, a 2.5% increase yr/yr.
Weekly FAS data showed 152,479 MT of soybeans were sold for export during the week that ended 3/16. That was down from 655k MT last week, and was only 12% of the same week last year’s sale. The week’s export shipment was 704k MT for a MY total of 43.534 MMT. USDA has the full year’s total marked at 54.8 MMT. The weekly report also had 199k MT of new crop bean sales – led by Chinese and unknown purchasers. The total 23/24 forward book was .75 MMT as of 3/16.
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Wheat Market Bouncing Double Digits
By: Barchart | March 24, 2023
The front month wheat futures market is trading with double digit gains. Chicago wheat futures are trading 19 1/4 to 21 1/2 cent gains. KC HRW is trading 23 to 26 cents higher. MPLS spring wheat futures are trading with 18 1/4 to 20 cent gains.
Farm Futures estimates wheat area will total 45.744m acres for 23/24. That would be a 5.6k acre shift yr/yr with a 6.3% lower spring wheat total and a 3.4% increase in winter wheat.
Weekly Export Sales data showed 125,568 MT of wheat was sold during the week that ended 3/16. That was down from 337k MT last week and from 156k MT during the same week last year, and was below the range of estimates. By class, 39% of the sale was HRW and 27% was durum while white wheat and HRS missed out. USDA’s data had total old crop commitments at 17.864 MMT as of 3/16 – which is 855 of the full year forecast. By class, old crop HRS has 198.8 mbu of commitments – 86.5% of the forecast. SRW is at 87.4% of USDA’s forecasted total with 100.5 mbu, and HRW is 81% of the way there with 178.5.
Turkey is on the market for 695k MT of wheat. Jordan issued a 120k MT wheat tender and a 110k MT feed barley tender. Taiwan is seeking 56.3k MT of milling wheat to be sourced from U.S.
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Corn Bouncing Through Friday
By: Barchart | March 24, 2023
Corn is currently trading near the day session’s highs with 5 to 9 1/4 cent gains. That has May contracts in the black for the week.
The weekly Ethanol report from USDA had the week’s average prices ranging from $2.03 - $2.15/gl in NE to $2.18 - $2.24/gal in IL, which was mostly 3 to 9 cents higher for the week. DDGS were quoted from $235-245 in MI to $280-300/ton in MO for the week leaving regional prices mostly higher from -$10 to +$17/ton. Corn oil prices were mostly weaker though the week with 1-8 cent regional losses to 49 – 58 cents/gal quotes.
A Farm Futures survey shows corn area will lose 1.1% for the year with a 87.68m acre area.
USDA confirmed another large export sale to China, with 204k MT of old crop sold in a daily announcement. Algeria is tendering for 70k MT of corn – likely to be sourced from South America.
The weekly Export Sales recap had 3.096 MMT of old crop corn bookings for the week that ended 3/16. That was a 156% increase for the week, triple the same week last year, and a marketing year high. However, most of it was the known Chinese business. Analysts had expected sales to range 1.7 MMT to 3.4 MMT. USDA reported China with 2.245 MMT of the total and Japan with 683k MT for the week. New crop sales were 93k MT, mostly to Mexico, and set the forward book at 1.9452 MMT. Old crop commitments were up to 34.94 MMT (1.376 bbu), or 74.4% of the USDA full year forecast.
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No Reserve. The Energy Report
By: Phil Flynn | March 24, 2023
Energy Secretary Jennifer Granholm helped sink oil by saying that it might take years to refill the Strategic Petroleum Reserve. That, along with renewed banking crisis fears now surrounding Deutsch Bank, is allowing the oil market to ignore current supply and demand fundamentals.
Deutsche Bank AG saw shares plunge by 11% with their default-swaps on Deutsche Bank’s euro. Senior debt surged to the highest level since being introduced in 2019 according to Bloomberg. The renewed banking concerns are hitting oil fears that central bankers have no clue as to what they are doing with their historic rate increase campaign.
Energy Secretary Granholm admitted that fixing the SPR might be harder than fixing the banks and it might not be as easy to refill the reserve as this administration led some to believe. She said, “This year will be difficult to refill oil reserves in the $70 range.” She is right, but if the banks keep failing, it might get easier. Granholm said that, “Refilling our reserve will take a few years.” So maybe they should go long Dec 23 crude.
Quantum Commodity Intelligence reminded us that Amos Hochstein, US special presidential coordinator for Biden said that, “The President would like to replenish the SPR in full of what we released and when prices start reaching towards that $70 (per barrel) mark that’s when we’ll look to increase and repurchase oil into the SPR,” Hochstein told CNBC, although added the $72-$73/b WTI range might also be considered. “We still have 400 million barrels, we still can manage any emergency,” said the advisor, but conceded that the SPR needs to be higher than current levels for national security and economic reasons. Hochstein said that tapping the SPR was critical in bringing prices down this year. “Oil prices are still a bit higher than they should be,” although he noted the administration was happy with the trajectory of oil prices. That was before but now he said, “Why don’t we take this one day at a time,” “We should take a deep breath and wait and see how this crisis right now impacts the oil and gas industry.”
Maybe the White House should take credit for the banking crisis as it may be the best tool they have to lower gas prices.
Treasury Secretary Yellen Seemed to take my advice regarding how she answered questions about bank guarantee. Instead of suggesting that bank guarantees were off the table, US Treasury Secretary Yellen said, “I am prepared for additional deposit actions if warranted”. That caused the stock market to snap back after a sell-off. Great job. Now if she could go to Germany and help Deutsch Bank that would be nice.
The ECB is raising rates but that is proving to be a policy mistake based on bank stress and recent economic data. Reuters is reporting that “EUROZONE manufacturers have reported a widespread decline in business activity so far in March, the ninth consecutive monthly decline since July 2022. The preliminary purchasing managers’ index fell to 47.1 (17th percentile for all months since 2006) in March from 48.5 (25th percentile) in February:”
Gasoline crack spreads came back to diesel levels to compete and make up for supplies of gasoline that are well below average. Of course, if the global banking system has a crisis, it might not matter.
Natural Gas is also taking pressure from banking conerns. Things are fluid but the story is the same. If the banking system stabilizes, then all energy is woefully underpriced. If it does not and this turns into a full-blown rout like 2008, then you had better get ready for a wild ride.
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13 consecutive daily losses for November Soybean and looks like it wants to make it 14
By: Barchart | March 23, 2023
• 13 consecutive daily losses for November Soybean and looks like it wants to make it 14.
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Link to monthly metals charts:
https://finviz.com/futures_charts.ashx?t=METALS&p=m1
Today's Futures Heat Map • Weakest: Soybean Oil, Soybean Meal, Coffee, Soybean
By: Barchart | March 23, 2023
• Today's Futures Heat Map
Strongest: Gold, Silver, Nasdaq 100 E-Mini, Copper
Weakest: Soybean Oil, Soybean Meal, Coffee, Soybean
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CBT SRW Falling To Hard Reds’ Gains
By: Barchart | March 23, 2023
The Chicago wheat futures market is trading with 2 3/4 to 4 1/4 cent losses through midday and setting near its lows for the session. Conversely the HRW and HRS markets are still in the black with front month gains of 2 1/2 to 5 1/4 and 1 to 3 cents respectively.
Weekly Export Sales data showed 125,568 MT of wheat was sold during the week that ended 3/16. That was down from 337k MT last week and from 156k MT during the same week last year, and was below the range of estimates. By class, 39% of the sale was HRW and 27% was durum while white wheat and HRS missed out. USDA’s data had total old crop commitments at 17.864 MMT as of 3/16 – which is 855 of the full year forecast. By class, old crop HRS has 198.8 mbu of commitments – 86.5% of the forecast. SRW is at 87.4% of USDA’s forecasted total with 100.5 mbu, and HRW is 81% of the way there with 178.5.
Turkey is on the market for 695k MT of wheat. Jordan issued a 120k MT wheat tender and a 110k MT feed barley tender. Taiwan is seeking 56.3k MT of milling wheat to be sourced from U.S.
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Cattle Dropping So Far Through Thursday
By: Barchart | March 23, 2023
Live cattle futures are off their lows, but still down by 10 to 25 cents for midday. The only sale for the FCE’s 913 head listed was for 84 South Dakota heifers at $164. USDA confirmed some cash trade Wednesday from $162 to $165, with the bulk of trading $1 lower near $163. Feeder cattle futures are trading mixed but mostly higher with the board 55 cents within UNCH. The CME Feeder Cattle Index was down by 11 cents to $187.69 for 3/21.
Beef export sales from the week that ended 3/16 were 18,642 MT. That was a 5% increase for the week, but was still down from 27.5k MT booked during the same week last year. USDA’s FAS reported South Korea as the top buyer with 10.8k MT of the total. Total beef commitments were marked at 167,715 MT through 3/16. That is 44% behind last year’s record pace.
USDA’s wholesale Boxed Beef prices were mixed again on Thursday morning, with Choice another $1.95 higher and Select down by another 32 cents. USDA estimated the week’s FI cattle slaughter at 378k head through Wednesday. That remains even with last week and 15k head above the same week last year.
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Hog Weakness Persisting Through Thursday’s Midday
By: Barchart | March 23, 2023
The hog market has a 7 cent midday gain for the April contract, as the other front months remain another 7 to 45 cents in the red so far. USDA’s National Average Base Hog price was another 79 cents weaker on Thursday morning to $76.50. The CME Lean Hog Index was $78.67 on 3/20, down by 88 cents.
Weekly Export Sales data showed 37,957 MT of pork was sold during the week that ended 3/16. That was up 6% for the week and was 63% above the same week last year led by sales to Mexico. The week’s export total was 30,493 MT for a season’s total of 324,077 MT. That is 1.3% ahead of last year’s pace.
Pork cutout futures are trading 12 cents to $1.52 lower at midday. USDA’s National Pork Carcass Cutout value was 83 cents higher Thursday morning to $80.69. USDA estimates the week’s FI hog slaughter through Wednesday at 1.422 million head. That trails last week by 26k and last year by 2k head.
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Cotton Dropping For Midday Quotes
By: Barchart | March 23, 2023
Cotton futures are sitting near their lows for the day so far for Thursday. The front months are down by 73 to 89 points.
FAS data had 310,236 RBs of cotton export sales for the week that ended 3/16. That is a 5-wk high and was near even with last year’s sale for the same week. Vietnam and China were the top buyers. The weekly data release also had 272,519 RBs of cotton exports for the week, which left the season’s total at 6.221 million – a 1.2% lag yr/yr. Outstanding sales remain well below last year, with total commitments at a 20% yr/yr lag through 3/16.
The Cotlook A Index was back up by 50 points on 3/22 to 92.30 cents/lb. The AWP for cotton is 68.58 cents/lb, and will be updated after the close.
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Beans Falling Through Thursday
By: Barchart | March 23, 2023
Soybean prices are back in the red and near their lows for the session at midday. The board shows losses of as much as 1.95% across the front months, following a failed overnight bounce. Meal futures are 1.8% to 2.5% in the red with double digit losses so far. The leader to the downside is soybean oil at midday, with a 4.8% loss in the May contract. At 52 cents/lb, that is the lowest the May BO contract has been since December of 2021.
Weekly FAS data showed 152,479 MT of soybeans were sold for export during the week that ended 3/16. That was down from 655k MT last week, and was only 12% of the same week last year’s sale. The week’s export shipment was 704k MT for a MY total of 43.534 MMT. USDA has the full year’s total marked at 54.8 MMT. The weekly report also had 199k MT of new crop bean sales – led by Chinese and unknown purchases. The total 23/24 forward book was .75 MMT as of 3/16.
For the products, USDA reported 121k MT of meal and 10.8k MT of oil was sold during the week that ended 3/16. Pre-report estimates were looking for at least 125k MT of meal, but no more than 10k MT of soy oil sales.
Abiove raised their estimate for Brazil’s soybean crop by 1 MMT to 153.6 MMT. They have exports reaching 92.3 MMT for the year.
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Corn Red Through Midday
By: Barchart | March 23, 2023
Thursday’s corn futures are trading 3 to 5 cents in the red, and near their intraday lows at midday.
USDA reported another 123k MT of old crop corn was sold to China in a private export sale announcement. The weekly Export Sales recap had 3.096 MMT of old crop corn bookings for the week that ended 3/16. That was a 156% increase for the week, triple the same week last year, and a marketing year high. However, most of it was the known Chinese business. Analysts had expected sales to range 1.7 MMT to 3.4 MMT. USDA reported China with 2.245 MMT of the total and Japan with 683k MT for the week. New crop sales were 93k MT, mostly to Mexico, and set the forward book at 1.9452 MMT. Old crop commitments were up to 34.94 MMT (1.376 bbu), or 74.4% of the USDA full year forecast.
USDA’s Ag Attache estimates Mexico will bring in 17.9 MMT of corn in 23/24. That would be a 500k MT increase yr/yr in the attaché estimate– citing larger feed demand.
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Crude Prices Firm As The Dollar Falls
By: Barchart | March 23, 2023
May WTI crude oil (CLK23) this morning is up +0.62 (+0.87%), and May RBOB gasoline (RBJ23) is up +4.90 (+1.91%). April Nymex natural gas (NGJ23) is up +0.030 (+1.38%).
Crude oil and gasoline prices this morning rose to 1-week highs and are moderately higher. Dollar weakness is bullish for energy prices after the dollar index (DXY00) today fell to a 6-week low. Also, a rally in stocks today shows confidence in the economic outlook and is bullish for energy demand and crude prices. However, gains in crude were limited on ample U.S. oil supplies after Wednesday's weekly EIA inventory report showed U.S. crude inventories rose to their highest in 1-3/4 years.
Apr nat-gas this morning is moderately higher on the outlook for colder U.S. temperatures to boost heating demand for nat-gas. Forecaster Atmospheric G2 said below-normal temperatures are expected across a large portion of the northern and western U.S. from March 28-April 1. Nat-gas prices fell back from their best levels after weekly EIA nat-gas inventories fell by -72 bcf, slightly less than expectations of -73 bcf.
Rising crude demand in India is bullish for oil prices. On Wednesday, India's oil ministry reported that India Feb crude oil imports rose +8.5% y/y to 19.1 MMT, the most in seven months.
In a bearish factor, Vortexa Monday reported that the amount of crude stored on tankers that have been stationary for at least a week rose +2.6% w/w to 82.71 million bbl in the week ended March 17.
Goldman Sachs Monday cut its 12-month crude price forecast for Brent crude to $94 a barrel from a previous forecast of $100 a barrel, citing "banking stress, recession fears, and an exodus of investor flows." Goldman now predicts that OPEC+ will start to reverse its supply cuts, currently at about 2 million bpd, in Q3 of 2024 versus a prior forecast of the second half of 2023.
A bearish factor for crude was last Wednesday's monthly report from the International Energy Agency (IEA) that said global crude supplies would "comfortably" exceed demand in the first half of this year. The IEA reported that global oil inventories surged by 52.9 million bbl in Jan to 7.8 billion bbl, the highest in 1-1/2 years.
On February 1, the OPEC+ Joint Ministerial Monitoring Committee recommended keeping crude production levels steady as the oil market awaits clarity on demand in China and crude supplies from Russia. OPEC crude production in February rose by +120,000 bpd to 29.24 million bpd.
Wednesday's EIA report showed that (1) U.S. crude oil inventories as of March 17 were +7.6% above the seasonal 5-year average, (2) gasoline inventories were -4.0% below the seasonal 5-year average, and (3) distillate inventories were -8.8% below the 5-year seasonal average. U.S. crude oil production in the week ended March 17 rose +0.8% w/w to 12.3 million bpd, matching a 2-3/4 year high and only 0.8 million bpd (-6.1%) below the Feb-2020 record-high of 13.1 million bpd.
Baker Hughes reported last Friday that active U.S. oil rigs in the week ended March 17 fell by -1 rig to a 9-month low of 589 rigs, moderately below the 2-1/2 year high of 627 rigs posted on December 2. U.S. active oil rigs have more than tripled from the 17-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity.
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Coffee Prices Under Pressure On Favorable Growing Conditions In Brazil
By: Barchart | March 23, 2023
May arabica coffee (KCK23) this morning is down -3.70 (-2.08%), and May ICE robusta coffee (RMK23) is down -5 (-0.24%).
Coffee prices this morning are moderately lower for a second day. Ideal growing conditions and reduced concerns about flooding in Brazil's coffee fields are bearish for coffee prices. The drier conditions should allow farmers in Minas Gerais, Brazil's largest arabica growing region, back into coffee fields to apply fertilizers and pesticides. Somar Meteorologia reported Monday that Brazil's Minas Gerais region received 11 mm of rain in the week ended March 19, or 24% of the historical average. Minas Gerais accounts for about 30% of Brazil's arabica crop.
A rebound in ICE inventories is bearish for robusta prices after ICE robusta coffee inventories Thursday rose to a 3-1/2 month high at 7,712 lots.
Last Wednesday, arabica fell to a 7-week low after the Brazilian real (^USDBRL) tumbled to a 2-1/2 month low. A weaker real encourages export selling from Brazil's coffee producers. Also, an increase in U.S. coffee inventories is negative for prices. Last Wednesday, the Green Coffee Association reported that U.S. Feb green coffee inventories rose +5.9% y/y to 6.105 mln bags.
Another bearish factor for coffee was the action by Safras & Mercado on March 3 to raise its Brazil 2022/23 coffee production estimate to 58.9 mln bags from a previous estimate of 57.3 mln bags.
A bullish factor for arabica prices was the projection from the National Federation of Coffee Growers on March 3 that coffee output in Colombia, the world's second-largest producer of arabica coffee, will drop -4.8% y/y to 5 mln bags in the first half of 2023 as excessive rain and cloudy days hurt yields.
Smaller global coffee exports support coffee prices after the International Coffee Organization (ICO) reported on February 2 that Oct-Dec global coffee exports fell -2.8% y/y to 30.27 mln bags. Also, coffee exports from Guatemala, the second-largest coffee producer in Central America, fell -8% y/y in January to 172,439 bags. Last Monday, the Colombia Coffee Growers Federation reported Colombia Feb coffee exports fell -6% y/y to 928,000 bags. Brazil's Feb green coffee exports dropped -35.8% y/y to 2.11 mln bags. Last Thursday, the General Department of Vietnam Customs reported that Vietnam's Feb coffee exports fell -34.2% y/y to 122,833 MT, and Jan-Feb coffee exports fell -14.7% y/y to 283,339 MT. Vietnam is the world's largest producer of robusta beans. By contrast, Honduran Feb coffee exports rose +32% y/y to 863,901 bags. Honduras is Central America's biggest exporter of arabica beans.
Robusta has support after coffee trader Volcafe forecasted the global 2023/24 robusta coffee market would see a record deficit of 5.6 mln bags. Volcafe predicts Indonesia, the world's third-largest robusta producer, will see its 2023/24 robusta coffee production fall to 9.1 mln bags, the smallest robusta crop in 10 years due to damage from excessive rainfall across its growing regions.
The International Coffee Organization (ICO) on March 10 projected that the global 2022/23 coffee market would be in deficit for a second year following the 4 mln bag to 5 mn bag deficit in 2021/22 due to arabica crop woes. The USDA, in its bi-annual report released on December 23, cut its global 2022/23 coffee production estimate by -1.3% to 172.8 mln bags from a June estimate of 175.0 mln bags. In addition, the USDA cut its 2022/23 global coffee ending stocks estimate by -1.7% to 34.1 mln bags from a June estimate of 34.7 mln bags. Meanwhile, the USDA's Foreign Agriculture Service (FAS) on November 22 cut its Brazil 2022/23 coffee production forecast by -2.6% to 62.6 mln bags from a prior estimate of 64.3 mln bags. This year was supposed to be the higher-yielding year of Brazil's biennial coffee crop, but coffee output this year was slashed by drought.
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US Grain Exports In Favor Again. The Corn & Ethanol
By: Daniel Flynn | March 23, 2023
We kickoff the day with Building Permits Final and Building Permits MoM at 7:00 A.M., Export Sales, Current Account, Initial Jobless Claims, Chicago Fed Activity Index, continuing Jobless Claims and Jobless Claims 4-Week Average at 7:30 A.M., New Home Sales and New Home Sales MoM at 9:00 A.M., EIA Natural Gas Stocks at 9:30 A.M., Kansas City Fed Composite Index and Kansas City Manufacturing Index at 10:00 A.M., 4-Week & 8-Week Vill Auction at 10:30 A.M., 10-Year TIPS Auction at 12:00 P.M., and Cold Storage at 2:00 P.M.
On the Corn Front Margy Eckelkamp with AGWEB reports what is the critical points for farmers in the northern plains? Dr. Lee Briese of Central Ag Consulting, Jamestown ND, says while farmers can get a lot of work done in a short time frame, the best thing they can do to get ready for spring is set on their priorities. “The planting priorities are number one”, he says. “pre emerge herbicide sprays re number two. And then we’re actually shifting out our fertilizer applications like in corn to a number three priority. Granted, we need that for later on, but we’ve got some time there to do planting, so we’re going to focus on getting the planting and that early spraying done.” While current forecasts are indicating a potential later start to planting, Briese says farmers are busy planning, and weighing their crop decisions. “It does start to feel after Easter and we get a lot of snow,” he says. “But we typically get rolling the last week of April, and get a fair amount done through early May.” He says spring wheat is still a “winner” for farmers based on economics. Generally he refers to corn production as a “headache” for farmers, unless the planting season does get late and farmers have the logistics to support corn production. While he’s looking at a blanket of snow, he says the frost underneath isn’t to thick. “Probably the one shining positive in this whole thing is we don’t have a real deep frost in the soil. Our soils are not frozen very deep like they typically are, so we’re kind of hoping that when the melt starts and a lot of moisture is going to be able to sink in rather than have runoff. We could use a little recharge,” Briese says. In addition to crop mix and planting timing, Briese is watching two agronomic trends: biologicals and cover crops. “I’m really looking forward to the potential for some these new biologicals,” Briese says. “But I think we really need to focus on putting them in the right place. We’ve seen some hits & misses in part because some of our ground soils not quite as bad as it could be. So maybe that’s to try some of the biologicals but I think we have’nt quite figured out the placement.” AS FAR AS COVER CROPS HE’S SEEN PRACTICAL USE OF COVER CROPS ESPECIALLY IN Challenging Conditions. “ When we’ve had some difficult planting seasons- like we’re experiencing now- we maybe can get the most of the field planted and some of that field is going to be underwater. That’s where I’ve seen more cover crops come in later into those once underwater areas as a weed fighting tool and a water management tool. That’s one way cover crops have been working.” As we close out March Madness and have the NCAA Finals in early April don’t forget about the March 31st Grain Stocks and Prospective Plantings.
On the Ethanol Front production and stocks below a week ago. The EIA says production averaged 997,000 barrels per day (bpd), a 10-Week low and a decrease of 17,000 on the week and 45,000 on the year. The Iowa State University Center for Agricultural and Rural Development says operating margins for the average Iowa plant last week were near break even point., just below last year’s levels. The Renewable Fuels Association says net inputs by refiners and blenders were up fractionally on the week, while volume of gasoline supplied to the market was more than 4% higher. Ethanol stocks of 26.1888 million barrels were down 206,000 from the previous week’s near one-year high, but were 40,000 above a year ago. The USDA’s next corn for ethanol use estimate is scheduled for April 11th. There were no trades or open interest in ethanol futures.
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She Said He Said. The Energy Report
By: Phil Flynn | March 23, 2023
Fed chairman Jerome Powell seemed to give confidence to the markets in his post Fed rate hike press conference but Treasury Secretary Janet Yellen at the same time, speaking about Biden’s budget, seemed to take some of that confidence away. Both speaking at the same time seemed to bolster confidence but some of the ill-advised phrasing of answers by Janet Yellen seemed to offset a more balanced tone from the Fed Chairman.
Oil prices are also looking for confidence as the banking crisis of confidence as we already alluded to, saw one of the biggest oil and petroleum futures and option liquidations in history. Yet if the market becomes convinced that this banking crisis is under control, will money flow back to petroleum where all the data points to wildly bullish fundamentals.
The Fed’s statement yesterday said that the US banking system is sound and resilient, and they also acknowledge that recent developments are likely to result in tighter credit conditions for households and businesses and could weigh on economic activity, hiring, and inflation. The extent of these effects are uncertain. They wanted to assure the markets that they remain highly attentive to the inflation risks.
Jerome Powell also said that he did not expect that the Federal Reserve would cut rates later in the year. The Fed fund futures sees it a different way. They are pricing in increasing odds of a rate cut later in the year.
Yet market optimism seemed to be zapped when Janet Yellen said quite indelicately said that, “the failure of a small community bank could trigger bank runs as much as a larger bank failure.” while that is true it was not exactly the type of statement that inspires confidence in a market that already has had its confidence shaken. Treasury Secretary Yellen also said that, “we are not considering ensuring all uninsured bank deposits”. That was a proposal that was floated earlier and seemed to alleviate fears that if you had your money in a regional bank that you should probably move it. Yet even considering the possibility that their deposits were safe, really provided the confidence that helped to stop another run on the banks. So, I guess I would have answered that question slightly differently. I would have said that they were still studying it even if the odds of a full-blown run of all bank deposits was unlikely.
At the end of the day, Silicon Valley Bank had all their depositors covered. I would have at least left open the possibility that the treasury and the banking authorities could once again, in the event of emergency, back all uninsured depositors. Don’t get me wrong. I’m not looking for the government to back all uninsured depositors. Yet I do think that when you help create a crisis by trying to micromanage the markets with too much talk and too little action on inflation, or at least delayed action on inflation, then you must be a lot more careful the way that you present your plans to fix what you have had a big part in breaking.
The crisis of confidence has not hit global oil demand yet. In fact, quite the opposite. According to the Energy Information Administration,(EIA) US petroleum exports surged to a whopping 12 million barrels a day, a near record high as the world is sucking down fossil fuels like crazy.
This is out of touch with the massive petroleum liquidation. John Kemp at Reuters pointed out that, “Portfolio investors dumped petroleum futures and options at one of the fastest rates on record in the early stages of the banking crisis.” Reuters showed that hedge funds and other money managers sold the equivalent of 139 million barrels in the six most important futures and options contracts over the seven days ending March 14. The volume of sales was the 12th largest in the 522 weeks since ICE Futures Europe and the U.S. Commodity Futures Trading Commission started to publish records in this form in 2013.
Fund managers have sold a total of 148 million barrels since the end of January, taking their combined position to 432 million barrels (20th percentile for all weeks since 2013).In the most recent week, there were heavy sales of Brent (-65 million barrels), NYMEX and ICE WTI (-59 million), U.S. gasoline (-12 million) and European gas oil (-7 million), with only minor buying of U.S. diesel (+4 million).
Now add to that data from the EIA that shows not only robust demand but extremely tight supply.
The EIA reported a 1.1 million barrel increase in crude supply, but a million-barrel drop in Cushing, Oklahoma. The EIA says that supply is 8% above average but that ignores the record drop in Strategic Petroleum Reserve Supply.
Yet a massive drop in products should cause some concern as the EIA showed that motor gasoline inventories decreased by 6.4 million barrels from last week and are about 4% below the five year.
average for this time of year. And distillate fuel inventories down by 3.3 million barrels last week and are about 9% below the five-year average for this time of year. Weekly demand for gasoline and diesel increased and total petroleum demand hit 20.26 million barrels a day.
What is clear is that demand destruction for petroleum products around the globe have not been adversely impacted by interest rate increases so far. Any demand weakness that we’ve seen because of higher rates seems to be offset by the reopening of China and the fact that Europe must be very aggressive in securing supply because of the risks that they face.
Even though petroleum traders dumped futures because of uncertainty surrounding the banking crisis, they may have to buy them back especially because global central banks are going to be a little bit more dovish than they were before. We would fully expect that at some point oil prices are going to have to come back because the wholesale dumping of oil positions were based more on fear than reality.
OPEC is not getting shaken by the recent sell off. They said that they are likely to keep on course with their 2 million barrel a day production cut until the end of 2023 despite the price drop that would suggest that OPEC has a lot of confidence that that demand is going to hold up. In fact everywhere you look when it comes to OPEC pricing, it appears that demand is continuing to be strong for OPEC supply.
Today we get the natural gas report. My expectation is that we will see a sizable 76 BCF withdrawal from supply. There were a lot of people who want to be long natural gas for the long haul, and I don’t blame them but it’s just a very difficult trade in the short term. I think natural gas futures are going to be a bit rangebound with an upward bias later in the year.
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In grains, oats are the leader and right now they are jumping ahead of the pack. Seems like other opportunities in grains are coming.
Today's Futures Heat Map • Strongest: Palladium, Gasoline, Silver, Cocoa
By: Barchart | March 22, 2023
• Today's Futures Heat Map
Strongest: Palladium, Gasoline, Silver, Cocoa
Weakest: Natural Gas, Wheat, Soybean Oil, Pork Cutout
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US Grain Exports In Favor Again. The Corn & Ethanol
By: Daniel Flynn | March 22, 2023
We kickoff the day with MBA 30-Year Mortgage Rate, MBA Mortgage Market Index, MBA Mortgage Refinance Index, MBA Purchase Index and MBA Mortgage Applications at 6:00 A.M., EIA Energy Stocks at 9:30 A.M., 17-Week Bill Auction at 10:30 A.M., Fed Interest Rate Decision, FOMC Economic Projections, Interest Rate Projection – Longer, Interest Rate Projection – Current, Interest Rate Projection – 2nd Yr., Interest Rate Projection 1st Year at 1:00 P.M., Fed Press Conference at 1:30 P.M., and Dairy Products Sales at 2:00 P.M.
The market is waiting for the Fed Announcement on interest rates. The street is expecting ¼ of a point hike. If rates stay unchanged traders will be concerned and thinking, what do they know? And how bad is it? If the Fed raises another ½ a point the public will not be happy.
On the Corn Front the market faced a lower close in yesterday’s action and spillover in the overnight market despite the announced sale of 136 tons 9% mil. bu.) of old crop corn to China. Total announced sales to China since last Monday have reached 88 mil. China has been a buyer of US old crop corn 5 out of the last 6 days. Widespread rains are expected over central areas of Argentina the next 2 to 3 days. With their worst drought in decades the impact on this year’s corn and soybean crops will be minimal. So we will be spotting the Black Sea Corridor and “tar spot” killing corn in the Midwest and Plains. The fungal disease also known as Phyllachora maydis “tar spot” first appeared in Illinois in 2015. Since then farmers spotted the spread to Nebraska for the first time in 2021, and in Missouri, Kansas and South Dakota last year. Also the basis for the China buying spree was largely absent and behind last years pace by nearly 40%. Rumors that the Chinese would enter the market for flash sales. Market experts say China needs the corn as the country reopens after COVID and demand picks up. US corn is also cheaper as China’s corn price is nearly $10.50 a bushel higher. US corn prices have dropped to a competitive level globally, below Ukraine and Brazil, which is running out of corn supplies. This is attractive to Chinese end users who are shrewd buyers. In the overnight electronic session the May corn is currently trading at 627 ½ which is 2 ½ cents lower. The trading range has been 633 to 623 ¼.
On the Ethanol Front ethanol advocates warn of lower Iowa corn prices without pipelines. Income for Iowa farmers might decline $1.1 billion per year if the states ethanol plants are unable to capture and sequester their carbon dioxide with the help of proposed pipelines to transport it, according to a study commissioned by the Iowa Renewable Fuels Association, The study – by Decision Innovation Solutions of Urbandale = predicts that three-quarters of ethanol production in Iowa would leave the state without pipelines and that farmers could see a reduction in the price they get for their corn up to 75 cents per bushel. “The wealth that has been generated in today’s agriculture is mostly due to ethanol plants that have been built,” said Tim Rucker, a northeast Iowa farmer, in a press call to discuss the study’s findings. The association, which advocates for policies that benefit the ethanol industry, is releasing results of the study amid three pipeline proposals from companies that want to transport captured carbon dioxide from Iowa ethanol plants out of state for underground sequestration and other commercial uses. Those projects are threatened by pending legislation in the Iowa House that would impose new restrictions on them that would affect the companies’ ability to use eminent domain to force land easements and would allow counties to dictate where they can be built, among other provisions. “I hope that it does not become law the way it is because it would kill these projects and have a very scarily large detrimental impact on our industry,” said Monte Shaw, the associations executive director. There were no trades or open interest in ethanol futures.
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Grains Report: Wheat, Rice, Corn and Oats, Soybeans
By: Jack Scoville | March 22, 2023
• WHEAT
General Comments: Wheat markets were lower yesterday on follow through selling as the world banking crisis s easing and as negotiations with Russia to extend the grain corridor deal with Ukraine were completed with a 60 day extension of the current agreement. Reports say that Russian offers continue to hit the world market and world prices. Trends turned sideways to up on the daily charts but remain down on the weekly charts. The problem remains demand as world supplies are not so large and US inventories are less. Ideas that big Russian offers and cheaper Russian prices would be a feature for a while in the world market was the driving force for the weaker prices, and price weakness could continue. Ideas are that both Australia and Russia are harvesting record to near record Wheat crops this year. The demand for US Wheat in international markets has been a disappointment all year and has been hindered by low prices and aggressive offers from Russia.
Overnight News: The southern Great Plains should get isolated showers. Temperatures should be near to below normal. Northern areas should see isolated showers. Temperatures will average below normal. The Canadian Prairies should see isolated snow showers. Temperatures should average below normal.
Chart Analysis: Trends in Chicago are mixed. Support is at 661, 654, and 648 May, with resistance at 697, 712, and 728 May. Trends in Kansas City are mixed. Support is at 809, 804, and 773 May, with resistance at 837, 853, and 862 May. Trends in Minneapolis are mixed. Support is at 840, 831, and 814 March, and resistance is at 862, 869, and 880 May.
• RICE:
General Comments: Rice was a little lower yesterday and trends are still up on the charts. It was a consolidation day yesterday but the price action is still positive for prices. Demand has been good from domestic sources and offers seem hard to find right now. Export demand has been uneven but was a marketing year high in the most recent weekly export sales report. Demand has been an issue for the market all year. There is not much going on in the domestic market right now although mills are milling for the domestic market in Arkansas and are bidding for some Rice. Markets from Texas to Mississippi are called quiet. Demand in general has been slow to moderate for Rice for exports. Planting is active in Texas and southern Louisiana.
Overnight News: The Delta should get isolated showers. Temperatures should be below normal.
Chart Analysis: Trends are up with no objectives. Support is at 1714, 1695, and 1665 May and resistance is at 1749, 1762, and 1772.
• CORN AND OATS
General Comments: Corn closed a little lower yesterday along with other ag markets. Oats were higher and trends remain up in this market. US prices are currently very competitive with those from South America as Brazil concentrates on Soybeans exports and not Corn and US demand could improve because of the price differentials. Prices from South America should now remain strong as countries there concentrate on Soybeans exports, so the US has a chance now to see export demand improve. The Brazil Summer crop and the Argentine crop is developing under stressful conditions. It has been wet so the Soybeans harvest has been delayed and the Safrinha Corn planting is becoming delayed as well. These delays continue. Brazil sources say that 20% of the Winter crop could be planted outside of the ideal window so yields could be hurt in the end. NOAA is forecasting that La Nina will develop this Summer and replace El Nino. US growing conditions are usually good when this happens.
Overnight News: China bought 178,000 tons of US Corn
Chart Analysis: Trends in Corn are mixed to up with objectives of 651 May. Support is at 625, 622, and 619 May, and resistance is at 639, 645, and 648 May. Trends in Oats are up with objectives of 371 May. Support is at 353, 349, and 343 May, and resistance is at 372, 378, and 382 May.
• SOYBEANS
General Comments: Soybeans were lower and Soybean Meal were mixed, with nearby months lower as the Brazil harvest makes it way slowly to the market. Soybean Oil was lower but held to a trading range. Reports from Brazil show that basis levels there are under pressure due to the large crop being harvested now. However, the basis might get higher soon as total South American production is probably about the same as last year. Brazil has a very good crop, but the additional Soybeans grown in Brazil will be wiped out by the losses in Argentina. Forecasts from NOAA for very good growing conditions in the Midwest were also a factor. Soybeans export demand is flowing to Brazil now. Argentina is the world’s largest exporter of Soybeans products while the US and Brazil battle for supremacy in Soybeans exports. It remains hot and dry in Argentina and crop conditions are getting worse. Production ideas there are still dropping and the Rosario exchange now estimates production near 27 million tons. The Buenos Aires Grain Exchange said production could be between 25 and 27 million tons. Weather is becoming less important now as the harvest is already underway in central and northern Brazil and will spread south soon. Central and northern Brazil have seen harvest operations interrupted with too much rain. Production potential for the Brazil is called very strong even with potential problems and losses in the south. Argentine production ideas continue to drop with the drought as planting is delayed and the crops already in the ground are stressed.
Overnight News:
Chart Analysis: Trends in Soybeans are mixed to down with objectives of 1458 and 1408 May. Support is at 1462, 1458 and 1439 May, and resistance is at 1500, 1516, and 1532 May. Trends in Soybean Meal are down with objectives of 446.00 May. Support is at 457.00, 447.00, and 442.00 May, and resistance is at 475.00, 485.00, and 490.00 May. Trends in Soybean Oil are mixed. Support is at 5610, 5540, and 5510 May, with resistance at 5850, 5980, and 6050 May.
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Softs Report: Cotton, OJ, Coffee, Sugar, Cocoa
By: Jack Scoville | March 22, 2023
• COTTON
General Comments: Cotton was higher, and trends are sideways. The weekly export sales report showed good demand, and demand ideas are improving and the banking crisis seems to be passing as a market factor now. Demand has been ramping up for the last couple of months but fell off. Some ideas that demand could soon increase more as China could start to open its economy in the next couple of weeks. China has also started buying again from Australia after refusing imports from that country for political reasons.
Overnight News: The Delta will get mostly dry conditions or isolated showers and below normal temperatures. The Southeast will see isolated showers and below normal temperatures. Texas will have isolated showers and near to below normal temperatures. The USDA average price is now 75.53 ct/lb. ICE said that certified stocks are now 1,485 bales, from 1,485 bales yesterday. ICE NY said that 0 notices were posted for delivery against March contracts and that total deliveries for the month are now 5 contracts.
Chart Trends: Trends in Cotton are mixed. Support is at 76.60, 75.40, and 74.00 May, with resistance of 79.20, 80.30 and 80.90 May.
• FCOJ
General Comments: FCOJ was a little higher yesterday and remains supported by very short Orange production estimates for Florida. Demand is thought to be backing away from FCOJ with prices as high as they are currently. Historically low estimates of production due in part to the hurricanes and in part to the greening disease that have hurt production, but conditions are significantly better now with scattered showers and moderate temperatures. The weather remains generally good for production around the world for the next crop including production areas in Florida that have been impacted in a big way by the two storms seen previously in the state. Brazil has some rain and conditions are rated good. Brazil continues to export to the EU and is increasing its exports to the US. Mexico is also exporting to the US.
Overnight News: Florida should get mostly dry conditions. Temperatures will average near to above normal. Brazil should get scattered showers and near normal temperatures. ICE NY said that 0 notices were posted for delivery against March futures and that total deliveries for the month are now 0 contracts.
Chart Trends: Trends in FCOJ are mixed. Support is at 234.00, 230.00, and 227.00 May, with resistance at 246.00, 250.00, and 253.00 May.
• COFFEE
General Comments: New York and London both closed higher with the lack of offers from South America and Vietnam still affecting prices. Ideas that the economy in the world is not going to go down also helped. Trends in both markets are sideways. Differentials are now weakening in Brazil, Honduras, and Colombia as the recent rally has increased offers, but reports indicate that differentials might start to firm up again after futures prices sold off. Ideas of big production for Brazil continue due primarily to rains falling in Coffee production areas now. Vietnam is estimated to have very good production this year due to a good growing season. There are ideas that production potential for both countries has been overrated. The weather in Brazil is currently very good for production potential but worse conditions seen earlier in the growing cycle hurt the overall production prospects as did bad weather last year. Vietnam is getting less rain now to aid harvest progress but volumes offered have not increased.
Overnight News: ICE certified stocks are a little lower today at 0.775 million bags. The ICO daily average price is now 175.52 ct/lb. Brazil will get isolated showers with near to above normal temperatures. Central America will get mostly dry conditions. Vietnam will see mostly dry conditions. ICE NY said that 0 contracts were tendered for delivery against March futures and that total deliveries for the month are now 643 contracts.
Chart Trends: Trends in New York are mixed. Support is at 179.00, 174.00, and 171.00 May, and resistance is at 183.00, 185.00 and 190.00 May. Trends in London are mixed. Support is at 2100, 2070, and 2030 May, and resistance is at 2160, 2190, and 2210 May.
• SUGAR
General Comments: New York and London closed lower yesterday, and the trends are mixed in both markets. Support came from ideas that the world banking system is still intact and able to keep business flowing. The world is still short Sugar. Indian production is thought to be less than 33 million tons this year as mills are closing early there and Thailand mills are also closing earlier than expected so the crop there might be less. Brazil production is solid this year. Reports from private analysts suggest that Brazil can have a 13% increase in center-south production. Good production prospects are seen for crops in central and northern areas of Brazil, but the south has seen drier weather. Most areas have good rains now. European production is expected to be reduced again this year, with French planted area likely to decline to a 14 year low for Sugarbeets. Some analysts now say that Chinese production could be the lowest in six years due to bad growing conditions.
Overnight News: Brazil will get isolated showers. Temperatures should average near to above normal. India will get mostly dry conditions and near to above normal temperatures.
Chart Trends: Trends in New York are mixed. Support is at 2030, 2010, and 1980 May and resistance is at 2100, 2130, and 2160 May. Trends in London are mixed. Support is at 577.00, 575.00, and 566.00 May and resistance is at 595.00, 603.00, and 609.00 May.
• COCOA
General Comments: New York and London closed higher, and trends are up for at least the short term in both New York and London. Talk is that hot and dry conditions reported in Ivory Coast could curtail mid-crop production, and main crop production ideas are not strong. Ivory Coast arrivals are now 1.727 million tons. Down 5.4% from last year. Those ideas changed a little over the previous weekend due to heavy rains reported in Cocoa areas of the country. Ghana has reported a disease in its Cocoa to hurt production potential there. The rest of West Africa appears to be in good condition. Good production is reported for the main crop and traders are worried about the world economy moving forward and how that could affect demand. The weather is good in Southeast Asia.
Overnight News: Isolated showers are forecast for West Africa. Temperatures will be near normal. Malaysia and Indonesia should see scattered showers. Temperatures should average near normal. Brazil will get isolated showers and near to above normal temperatures. ICE certified stocks are higher today at 5.150 million bags.
Chart Trends: Trends in New York are up with objectives of 2870, 22880, and 2960 May. Support is at 2780, 2740, and 2690 May, with resistance at 2850, 2930, and 2960 May. Trends in London are up with objectives of 2170, 2180, and 2220 May. Support is at 2100, 2070, and 2030 May, with resistance at 2150, 2170, and 2200 May.
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Bank Daze. The Energy Report
By: Phil Flynn | March 22, 2023
Treasury Secretary Janet Yellen said yesterday in remarks before the American Bankers Association that, “The dollars status of the reserve currency should be cherished and should not be jeopardized.” Well then Secretary Yellen, tell your boss to quit spending money!
Treasury Secretary Yellen tried to bring confidence back to the US banking system but she looked not so convincing as she had something like a three ring binder with answers to questions similar to what Press Secretary Karine Jean-Pierre has during her press conferences. She seemed to suggest that she was willing to take additional action to help out small banks but stopped short of a full-blown guarantee of all depositor’s capital. She said that, “There’s time to evaluate whether some adjustments are necessary in supervision and regulation to address the root causes of the crisis,” she said. “What I’m focused on is stabilizing our system and restoring the confidence of depositors.”
Yet the perception of a bank guarantee seemed to allow oil to come back up but the collateral damage from the price crash will only serve to tighten oil supplies more severely later in the year. Bloomberg is reporting that the, “US shale patch may lose as much as 20% of its activity over the next year if energy prices hold at current levels, according to one of the biggest private equity players in the industry. Crude would need to rise by about 15% to $80 a barrel, and gas would have to climb by more than a third to $3 per million British thermal units for drilling and frack work to maintain its current pace, Quantum Energy Partners Chief Executive Officer Wil Van Loh said in an interview Tuesday.
Not only have some traders had their confidence in the banking sector crushed but confidence in oil data that the Energy Information Administration admits may not reflect the actual amount of oil that is ready to be used as well. Yesterday, The American Petroleum Institute reported that crude stockpiles rose by 3.262 million barrels during the week ended March 17. That number seems to be out of line with reports of record exports by the US. Products did fall as the API reported a 1.09Million barrel draw in gasoline stocks for last week and a 1.84-million-barrel drop in distillate stockpiles. I would expect to see more bullish numbers in today’s Energy Information Administration (EIA) report.
The tightness in product supplies probably means that any relief at the gas pump will be short lived. Reuters is reporting that, ”As U.S. refiners rejigger operations to reflect declining domestic motor fuels demand in the next decade, they will seek to maximize diesel and biofuels production for exports, industry analysts say. A rationalization of global refining capacity along with Russia’s continued war in Ukraine has encouraged U.S. refiners to prioritize distillates as global diesel inventories sagged and demand jumped. At its peak last year, U.S. refiners were exporting a record 1.57 million barrels per day of distillate fuel, with profit margins topping $70 a barrel, more than double that of gasoline.
Yet while oil inventories might matter, the Fed will trump almost everything. The Fed has bad credibility and so they will be forced to raise interest rates to avoid looking bad. Yet based on the stress in the banking system, they probably should be cutting rates or at least taking a pause. Making banks insolvent is not a good plan to beat inflation.
Geopolitically the world is more of a mess. Biden’s foreign policies have made friends of our enemy’s enemies. His shunning of Saudi Arabia not only has driven Saudi closer to China but now has even made peace with their archenemy Iran. Chinese President Xi Jinping and Russian President Vladimir Putin now are in a economic and business pact that will shun trade in the US dollar. You Remember the U.S. dollar, right? The world’s reserve currency that should be cherished according to Treasury Secretary Yellen. Does anyone believe that the world is a safer place because of Biden’s foreign policy?
Throughout the bank turmoil we feel oil and products have become way too cheap. While many have taken to the possibility of triple digit oil this year, I still think the fundamental case for triple digit oil this year still exists. Demand should rise dramatically because of China’s record-breaking demand. Russian Deputy Prime Minister Alexander Novak said yesterday that Russia will continue a 500,000 barrels per day oil production cut until the end of June. Global central banks will have to slow interest rate hikes. The dollar should weaken and because of the state of global geopolitics the risk to supply is high. Get hedged because the upside price risks are huge especially if the market senses that this banking crisis can be brought under control.
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