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The Corn & Ethanol Report
By: Daniel Flynn | February 1, 2023
We kickoff the day with MBA 30=Year Mortgage Rate, MBA Mortgage Market Index, MBA Purchase Index, and MBA Mortgage Applications at 6:00 A.M. at 6:00 A.M.., ADP Employment Change at 7:15 A.M., Global Manufacturing PMI, Final at 8{45 A.M., ISM Manufacturing PMI, JOLT’s Job Openings, ISM Manufacturing New Orders, and ISM Manufacturing Spending at 9:00 A.M., EIA Energy Stocks at 9:30 A.M., 17-Week Bill Auction at 1
0:30 A.M., Fed Interest Rate Decision at 1:00 P.M., Fed Press Conference at 1:30 P.M., Cotton System, Dairy Product Sales, Fats & Oils, and Grain Crushings at 2:00 P.M. All traders will be watching the Fed”s next move.
On the Corn Front US Farmers sound alarm on single most catastrophic thing headed for corn crops. Farmers visit Washington DC warning they could go out of business over Mexico’s genetically modified corn ban. Meanwhile, a Chinese Corn Mill project in the USA has been halted on security concerns. The Us had to step in and let the market search in Free Enterprise and Fair Market Value. Brazil’s exports prove that exports to China will be on the low end of their needs. In yesterday’s action the market closed mostly unchanged as doubt continues to loom with COVID19 along with concerns of feed for human consumption. In the overnight electronic session the March corn is currently trading at 677 which is 2 3/3 cents lower. The trading range has been 679 ¼ to 675 ¼.
On the Ethanol Front Stellantis focused on ethanol hybrid vehicles in South America. Stellantis NV (STLA.MI) expects to have in place by the end of the year with the technologies needed to develop ethanol hybrid vehicles in Brazil, the head of the carmaker in South America. This will be another political football as governments continue to, “funding clean energy alternatives.” As the average Joe is worried about the economy. There were no trades in ethanol futures.
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Certainty. The Energy Report
By: Phil Flynn | February 1, 2023
It’s nice to know, in an uncertain world, that there are some things you can count on. For example, as I predicted yesterday, the White House bashed Exxon Mobil’s blow-out profits, and The Energy Information Administration (EIA) admitted that they have once again massively underestimated oil demand.
How dare Exxon Mobil make a record yearly profit of 55.7 billion dollars as Americans are seeing a record increase in rage anxiety because their electric cars aren’t holding a charge in the cold. The White House expressed outrage and said that oil companies should increase production, but “are instead choosing to plow those profits into padding the pockets of executives and shareholders”. Things are getting so bad that Biden may have to create safe rooms so the EV buyers can scream and cry especially as their electricity costs soar and may find out that getting off of gasoline might not save them any money anyway. Yet Biden has created a lot of green jobs. The kids in the Congo cobalt mines are busier than ever. If Biden wants to keep pushing for more EVs, then he better start finding out more ways to get those mines ready so we can get the rare earth minerals to produce these electric cars that store energy mainly produced with coal and natural gas. And if the White House is serious about oil companies producing more oil, then maybe we should quickly approve the Willow Project.
Bloomberg News reports that, “US President Joe Biden is nearing a critical decision on a massive proposed oil project in northwest Alaska that could unlock 600 million barrels of crude and has drawn the ire of environmentalists who have dubbed it a “carbon bomb.” Biden’s verdict on ConocoPhillips’ $8 billion Willow venture in the National Petroleum Reserve-Alaska is being seen as a litmus test of his commitment to combating climate change. Bloomberg says that, “The project poses a political risk for the president, who has implored oil companies to boost production even as he tries to speed the US transition to emission-free energy. It also presents a new test of Biden’s ability to balance the desires of two oft-competing constituencies: environmentalists and organized labor. The Interior Department is expected in the coming days to release a final environmental impact statement on Willow, ordered after a federal court tossed out the previous analysis and project approval from the Trump administration according to Bloomberg.
Wait, what? President Trump was for it. So, Biden can’t be for it? Or can he. I mean just because the proposed Willow project in the northeast section of the National Petroleum Reserve-Alaska would produce 180,000 barrels of oil each day, create $10 billion in tax and royalty revenues, and create 2,000 construction jobs and 300 permanent ones according to the DC brief then Biden can’t be for it because he helped kill the project because Trump was for it.
So, Biden wants the oil companies to produce more oil but at the same time he stands in their way. And then blame them for record profits as his policies reduce supply and thereby increase profits for big oil. Conoco Phillips must be getting tired of the long approval process and other global investors looking at the United States must be losing confidence that this county is a place to do business when the government continues to make regulatory decisions based on politics and not science or even reality. So Biden wants oil companies to invest their shareholder’s money into projects where they could lose billions of dollars at the whim of this man.
The EIA just can’t seem to get that ol’ oil demand number just right. They adjusted November upward by close to 400,000 barrels a day in November to 20.593m b/d from the previously reported 20.211m b/d. To put that in perspective, that’s about twice as much oil that Willow is expected to produce.
Biden must be upset with BP because they expect to produce less oil. Now wait a minute, I thought he wanted them to produce less oil before he wanted them to produce more. I think he was against oil before he was for it. Yet BP released a report Monday predicting that the world would sharply reduce its reliance on oil and gas, over the next 25 years as countries transition to renewable sources of energy. In its annual energy outlook, BP said that fossil fuels, which it said accounted for 80% of energy usage in 2019, would fall to just 20% by 2050.
Yet despite all of this big-picture drama that has put oil in a secular bull market, the short-term focus is still on the Fed and OPEC. OPEC is expected to stay the course even as they reported they are still having a hard time pumping their quota. OPEC missed their output target by 920,000 barrels a day and that is a worse performance than the month before when they missed the target by only 780,000 barrels a day. Russia and OPEC are showing solidarity and there are predictions that we will see Russian oil production drop by at least a million barrels a day in the coming months.
Prices have moved dramatically. With the Fed talks, speeches and expectations, there is no doubt that if the Fed comes off as more hawkish, oil prices are going to struggle. On the other hand, if they come in the middle of the road, oil prices should make new highs for the move and reestablish its uptrend. Any close above 8050 today for crude oil, should project us sharply higher in the coming weeks.
The report from the American Petroleum Institute was a little bit bearish. Refinery issues helped feed a 6.33 million barrel crude oil increase and surprisingly both gasoline and diesel supply were higher. The API reported that yes, line supplies were up 2.73 and diesel supplies were up 1.53 million barrels!
Dan Molinski of Dow Jones wrote yesterday that, “Natural-gas prices appear to be steadying, up 0.2% at $2.684/mmBtu, which may help the market avoid seeing its largest one-month decline on record. The front-month contract is currently down 40% for the month of January, which would be the largest one-month decline since the month of January 2001, when it fell by 41.6%. But if another bout of selling ensues between now and the end of the trading day at 2:30 pm ET, and prices settle at or below $2.6127/mmBtu, January 2023’s decline would be nearly 42%, and it would go down as natural gas’s worst-performing month percentage-wise on record, with data going back to April 1990.
What makes that more amazing is the EIA reported that U.S. natural gas consumption reached record daily high in late December 2022. On December 23, 2022, natural gas consumption in the U.S. Lower 48 states reached a daily record high of 141.0 billion cubic feet (Bcf), according to estimates from S&P Global Commodity Insights. The previous record was 137.4 Bcf, set on January 1, 2018. Below-normal temperatures in mid-to late December increased demand for natural gas used for residential and commercial space heating and electric power generation. At the same time, natural gas production quickly fell because of mechanical issues caused by cold temperatures.
Scott Disavino at Reuters is reporting potential major progress in reopening Freeport LNG which was a major factor in the natural gas price collapse. He reported that Freeport LNG asked U.S. regulators for approval to add natural gas to one of the three idled units at its liquefied natural gas (LNG) export plant in Texas, a milestone in efforts to restore production after a seven-month outage, according to a federal filing made available on Tuesday.
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Today's Futures Heat Map • Strongest: Coffee, Orange Juice, Heating Oil, Sugar
By: Barchart | January 31, 2023
• Today's Futures Heat Map
Strongest: Coffee, Orange Juice, Heating Oil, Sugar
Weakest: Cocoa, Soybean Meal, Corn, Milk
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Commodity price changes over the last year...
By: Charlie Bilello | January 31, 2023
• Commodity price changes over the last year...
Sugar: +15%
Heating Oil: +13%
Corn: +9%
Gold: +8%
US CPI: +6.5%
Soybeans: +6%
Silver: +5%
Gasoline: -1%
Wheat: -3%
Copper: -5%
Brent Crude: -5%
Zinc: -6%
WTI Crude: -10%
Coffee: -27%
Cotton: -30%
Natural Gas: -38%
Lumber: -48%
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Grains Report: Wheat, Rice, Corn and Oats, Soybeans
By: Jack Scoville | January 31, 2023
• WHEAT
General Comments: Wheat markets were higher yesterday and trends are sideways in all three markets on the daily and weekly charts. The rally came on news that the US and Germany were about to supply tanks to Ukraine, allowing the war to get hotter while the Wheat develops and the Corn maybe gets planted. Russia has a large production although UISDA says it is not nearly as large as Russia says it is. Big Russian production goes against the difficulty of moving grain from the Black Sea due to insurance requirements, but so far the lack of insurance has not increased demand for US Wheat as the Russian Wheat is still moving. 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. Ukraine is also looking for new business for its crops and Russia is aggressive in the world market as it looks for cash to fund the war.
Overnight News: The southern Great Plains should get mostly dry conditions. Temperatures should average near to below normal. Northern areas should see mostly dry conditions. 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 744, 729, and 721 March, with resistance at 766, 7672, and 784 March. Trends in Kansas City are mixed to up with objectives of 895 and 910 March. Support is at 871, 866, and 850 March, with resistance at 895, 8901, and 915 March. Trends in Minneapolis are mixed to up with objectives of 933, 961, and 969 March. Support is at 907, 897, and 890 March, and resistance is at 935, 942, and 946 March.
• RICE:
General Comments: Rice was lower yesterday and the daily charts show that futures failed at resistance areas near 1800 again. Demand has been a problem for bullish traders. 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 and although some Rice moved in Texas at what were called very good prices. Demand in general has been slow to moderate for Rice for exports and solid for domestic uses.
Overnight News: The Delta should get isolated showers. Temperatures should be below normal.
Chart Analysis: Trends are mixed. Support is at 1800, 1785, and 1776 March and resistance is at 1825, 1836, and 1840 March.
• CORN AND OATS
General Comments: Corn and Oats closed higher yesterday, mostly in sympathy with the rallies in Wheat and especially the Soy complex. Both markets remain in up trends established in early December. The export demand was solid last week even though demand remains well behind the pace to make USDA objectives. Brazil has been hanging on for its Summer crop although losses are now being reported. Argentina has suffered through some extreme drought. The Brazil Winter crop is harvested and China is buying the surplus. The Summer crop and the Argentine crop is developing under stressful conditions. The next Winter crop is going into the ground in good conditions, but it has been wet so the Soybeans harvest has been delayed and the Corn planting is becoming delayed as well. Weak demand overall for US Corn remains a big problem for the market. There are increasing concerns about demand with the Chinese economic problems caused by the lockdowns creating the possibility of less demand as South America has much better crops this year to compete with the US for sales. China is now moving rapidly to open the economy and allow people to move around with no lockdowns so the demand could start to improve. The improvement might take some time as the Chinese people get Covid, but they should be past this episode in a few weeks and demand might start to improve at that time.
Overnight News:
Chart Analysis: Trends in Corn are mixed to up with objectives of 688 and 701 March. Support is at 675, 669, and 666 March, and resistance is at 689, 693, and 698 March. Trends in Oats are up with objectives of 400 March. Support is at 386, 377, and 372 March, and resistance is at 399, 405, and 411 March.
• SOYBEANS
General Comments: Soybeans and both products were higher yesterday despite the news that Argentina and southern Brazil weather changed to a much wetter pattern for the last week. The pattern in southern Brazil and Argentina is shifting back to dry again. Price trends are turning up for Soybeans and Soybean Meal as the harvest in Brazil starts to expand in central and northern areas. These areas have seen too much rain and the harvest has been slow. The weekly charts show that Soybeans are trying to hold an uptrend line established in October while Soybean Meal seems to be bouncing off or support areas established a few weeks ago. Soybean Oil is in a sideways trend. Production potential for the Brazil is called very strong even with potential problems and losses in the south. Even so, production of less than 150 million tons is possible now although most estimates remain near 153 million tons. Argentine production ideas continue to drop with the drought as planting is delayed and the crops already in the ground are stressed. Production estimates are now closer to 40 million tons than original projections near 50 million. Ideas that Chinese demand will improve, but this could take a few more weeks as a very large part of the population now has Covid. This has delayed a robust economic return for the country.
Overnight News:
Chart Analysis: Trends in Soybeans are mixed to up with objectives of 1557 and 1564 March. Support is at 1513, 1503, and 1487 March, and resistance is at 1538, 1548, and 1556 March. Trends in Soybean Meal are up with objectives of 505.00 and 515.00 March. Support is at 479.00, 472.00, and 468.00 March, and resistance is at 490.00, 496.00, and 502.00 March. Trends in Soybean Oil are mixed. Support is at 5990, 5940, and 5850 March, with resistance at 6220, 6360, and 6470 March.
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Softs Report: Cotton, OJ, Coffee, Sugar, Cocoa
By: Jack Scoville | January 31, 2023
• COTTON
General Comments: Cotton was lower and still remains inside the trading range created since the beginning of November. Futures are still showing bad demand fundamentals that have kept prices from rallying through resistance areas. Overall, the demand for US Cotton has not been strong although better demand has developed over the last couple of weeks. Some ideas that demand could soon increase as China could start to open its economy in the next couple of months as Covid outbreaks should start to weaken as people get vaccinated or immune. Covid is now widespread in China so the beneficial economic effects of the opening are being delayed but these effects should start to be felt as the people there achieve immunity over the next few weeks.
Overnight News: The Delta will get isolated to scattered showers and near to below normal temperatures. The Southeast will see isolated to scattered showers and above normal temperatures. Texas will have isolated showers and below normal temperatures. The USDA average price is now 82.89 ct/lb. ICE said that certified stocks are now 8,900 bales, from 8,900 bales yesterday.
Chart Trends: Trends in Cotton are mixed. Support is at 83.20, 82.00, and 81.30 March, with resistance of 87.50, 88.90 and 89.90 March.
• FCOJ
General Comments: FCOJ was higher and trends started to turn up again on the daily charts. Demand should start to improve with the holidays now over and cold air being reported over much of the country. Historically low estimates of production due in part to the hurricanes and in part to the greening disease has hurt production remain in place but are apparently part of the price structure now. The weather remains generally good for production around the world for the next crop but not for production areas in Florida that have been impacted in a big way by the two storms. Brazil has some rain and conditions are rated good. Mostly dry conditions are in the forecast for the coming days.
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 mixed o up with objectives of 220.00 March. Support is at 207.00, 203.00, and 201.00 March, with resistance at 214.00, 217.00, and 220.00 March.
• COFFEE
General Comments: New York closed higher and London closed lower yesterday with Vietnam back at work after the Lunar New Year and the US Dollar moving a little lower during the session. The charts show that New York is trying to complete a bottom that could be significant to medium range pricing. London weekly charts show a market that has been working a little higher almost every week since November but ran into a little speculative long liquidation along with little new buying interest yesterday. Ideas of big production for Brazil continue due primarily to rains falling in Coffee production areas now and as offers stayed strong from Brazil and increasingly from Vietnam. There are ideas that production potential for Brazil had been overrated and reports of too much rain in Vietnam affected the harvest progress. 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. Ideas are that the market will have more than enough Coffee either way when the next harvest comes in a few months.
Overnight News: ICE certified stocks are higher today at 0.852 million bags. The ICO daily average price is now 167.34 ct/lb. Brazil will get isolated showers in northern areas with near normal temperatures. Central America will get scattered showers. Vietnam will see scattered showers.
Chart Trends: Trends in New York are up with objectives of 172.00 March. Support is at 167.00, 165.00, and 163.00 March, and resistance is at 175.00, 177.00 and 183.00 March. Trends in London are up with objectives of 2040 March. Support is at 2000, 1950, and 1910 March, and resistance is at 2040, 2070, and 2120 March.
• SUGAR
General Comments: New York and London closed higher yesterday and chart patterns indicate that prices can move higher again over the course of this week. Good production prospects are seen for crops in central and northern areas of Brazil, but the south should turn dry again after some rains in the last week or so. The harvest has been delayed in Thailand. Australia and Central America harvests are also delayed but are more active now. Ideas are that India will produce about 34.3 million tons of Sugar this year, about 4% less than the previous outlook.
Overnight News: Brazil will get scattered showers. Temperatures should average near normal. India will get mostly dry conditions and near to above normal temperatures.
Chart Trends: Trends in New York are up with objectives of 2160 March. Support is at 2080, 2050, and 2020 March and resistance is at 2130, 2160, and 2170 March. Trends in London are up with objectives of 573.00 and 603.00 March. Support is at 562.00, 559.00, and 552.00 March and resistance is at 571.00, 579.00, and 582.00 March.
• COCOA
General Comments: New York closed a little lower and London closed a little higher yesterday. Both markets show that futures are in mostly a range trade. Weaker demand shown by the grind data that got released in the last week. Talk is that hot and dry conditions reported in Ivory Coast could curtail mid crop production, but main crop production ideas are strong. Ghana has reported a disease in its Cocoa to hurt production potential there. The rest of West Africa appears to be in good condition. The North American grind was 8.1% lower and the EU and Asian grinds were about 2% lower. Good production is reported for the main crop and traders are worried about the world economy moving forward and how that could affect demand. Supplies of Cocoa are large at ports. The weather is good in Southeast Asia.
Overnight News: Mostly dry conditions 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 scattered showers and near normal temperatures. ICE certified stocks are lower today at 4.961 million bags.
Chart Trends: Trends in New York are mixed. Support is at 2570, 2540, and 2510 March, with resistance at 2650, 2670, and 2700 March. Trends in London are mixed to up with objectives of 2060, 2090, and 2160 March. Support is at 2020, 1990, and 1950 March, with resistance at 2050, 2080, and 2090 March.
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FOMC Meetings Begin. The Corn & Ethanol Report
By: Daniel Flynn | January 31, 2023
We kickoff the day with Employment Cost Index QoQ, Employment Cost-Benefits QoQ, and Employment Cost-Wages QoQ, at 7:30 A.M., Redbook YoY at 7:55 A.M., S&P/Case-Schiller Home Price MoM & YoY, House Price Index at 8:00 A.M., Chicago PMI at 8:45 A.M., Consumer Confidence at 9:00 A.M, Dallas Fed Services Index and Dallas Fed Services Revenues at 9:30 A.M., Cattle at 2:00 P.M., API Energy Stocks at 3:30 P.M., and the First of 2 FOMC Meetings with Rate Decision Tomorrow at 1:00 P.M.
On the Corn Front PRO Farmer Analysis reports, Expected large Brazilian corn exports to China in 2023 are worrying Brazil’s meat companies, according to a statement from Santa Catarina’s meat processors lobby Sindicarne. The group said competition from Chinese buyers is already reducing local supplies and making corn used for feed poultry and pork an “overpriced commodity. “Even with the sector being more prepared for negotiations and more attentive to stocks and purchases, there is always competition from the international market,” Sindicarne said. “For 2023 the signs are worrying.” According to Sindicarne, which represents global poultry and pork processors including JBS and BRF, the government must also “do its part” to attract investments aimed at reducing Brazil’s bottlenecks. The group said that while Brazil has created decent logistics network to export grains, there are no railroads connecting grain regions in the central west to southern Brazil, where pork and chicken are typically raised and processed.
Speaking of bottlenecks and the crisis low river levels. The US Army Corps of Engineers has been dredging the Mighty Mississippi 24-hours a day, 7-days a week since July….. ever since low water levels on the river due to drought… Started causing shipping backups. The Corps hopes to be done dredging by the end of the month. I will keep you posted as I receive the news. In yesterday’s action corn prices closed steady to higher following soybeans lead. Argentina had short-term relief to drought stricken areas of Argentina, forecasts expect dryer conditions by the end of the week. The next rain event slated for the middle part of this week across western and southern parts of Argentina, away from the larger producing areas. In the overnight electronic session the March corn is currently trading at 681 ¾ which is 2 cents lower. The trading range has been 683 ½ to 680 ½.
On the Ethanol Front India is blending its way to needing US ethanol news if it can keep on track for more ethanol in gasoline. Meanwhile, attorney generals of seven Midwest states are urging the EPA to respond to the E15 petition. The attorney generals of Iowa, Illinois, Minnesota, Missouri, Nebraska, South Dakota, and Wisconsin are urging the Biden administration to take action on the petition filed by a bipartisan coalition of governors in April 2022 seeking a permanent solution to year-round E15 sales with their states. Ethanol Futures lacking any open interest.
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Fed Anxiety. The Energy Report
By: Phil Flynn | January 31, 2023
Forget rising gasoline prices or the fact that there was no more oil released from the Strategic Petroleum Reserve (SPR). The oil and product markets are infected with Fed anxiety. Oh sure, they might be worried about OPEC and the upcoming Russian sanctions and stupid price cap but really it was Fed anxiety that shook the oil trade. To be fair it was not just oil that is infected with fear, The rally in the US dollar led to risk-off selling for many high-flying commodities yesterday and today except for a lot of the grain complex that is getting more concerned about the size of the South American crop against a backdrop of global carryover stocks that are hovering very close to all-time lows.
Yet perhaps the market should be more upbeat about the prospects for the global economy as the International Monetary Fund is raising their forecast for growth and lowering the outlook for inflation. The IMF says that, “Global growth is projected to fall from an estimated 3.4 percent in 2022 to 2.9 percent in 2023, then rise to 3.1 percent in 2024. The forecast for 2023 is 0.2 percentage point higher than predicted in the October 2022 World Economic Outlook (WEO) but below the historical (2000–19) average of 3.8 percent. The rise in central bank rates to fight inflation and Russia’s war in Ukraine continue to weigh on economic activity. The rapid spread of COVID-19 in China dampened growth in 2022, but the recent reopening has paved the way for a faster-than-expected recovery. Global inflation is expected to fall from 8.8 percent in 2022 to 6.6 percent in 2023 and 4.3 percent in 2024, still above pre-pandemic (2017–19) levels of about 3.5 percent.
Yet if we see an uptick in growth, where are we going to get the extra oil to meet a surge in Chinese oil demand? The Biden administration says it wants to crack down on Iran which is skirting oil sanctions but lacks the willpower because they fear an oil price spike. Iran has been laughing at US oil sanctions as they have no respect or fear of the Biden administration.
The Biden administration’s SPR game has come to an end as there was no oil released from the SPR for the third straight week. That should lead to some major US crude oil draws in the coming weeks after US refiners start to come out of maintenance both planned and unplanned. This week, we should see another increase in Cushing, OK supply as refiners are still shut down but with an uptick in exports. Crude supply should see a drawdown in tonight’s American Petroleum Institute report. We should also see a draw in gasoline and distillate and the tightness of product supply has been showing up at your local gas station. While the futures indicate that we will see some relief, the truth is that the oil product market is on a tinder keg. This is key after it was reported that EU imports of non-Russian gasoil and diesel rose sharply last week, helping to build up inventories ahead of the bloc’s impending embargo on Russian oil products.
Oil traders should not be expecting too much news out of the OPEC meeting. Right now they are continuing to stay the course even as the OPEC cartel is warning about historically low spare oil production capacity. OPEC is right, there’s no room for error in the system. It was reported that Russia’s President Vladimir Putin and Saudi Arabia’s Crown Prince Mohamed bin Salman discussed cooperation within OPEC+ to provide stability to the global oil market. That should make the anti-US oil crowd happy as they continue to strengthen Putin and Bin Salman with every barrel of oil and every BCF of gas they do not let us produce.
Venezuela, the Biden administration’s great hope to replace SPR oil, now wants to get paid. I know! That messes things up. It seems that even as they are starting to sell oil after Biden lifted some sanctions, because they owe everybody money, they do not see the cash. Now their state oil firm PDVSA is toughening terms for buyers after a month-long halt to most exports of crude and fuel, demanding prepayment ahead of loadings in either cash, goods, or services, company documents showed according to Reuters. PDVSA’s new Chief Executive Pedro Tellechea put the move in place this month. It reinforces measures implemented last year after several buyers skipped out on payments for oil, which provides most of the South American country’s income.
While green energy madness drives up costs for everyday people and reduces global security, the question should be why the country is against natural gas. Talking about banning gas stoves and not allowing natural gas buildings even though natural gas is the cleanest burning fossil fuel. Yet the US is awash in natural gas and that could help lower the cost of heating and electricity if the government would embrace this fuel. Many forget that Alan Greenspan once warned that the greatest threat to the US economy was our inability to produce natural gas. The US oil and gas industry solved the issue and helped avert a major economic crisis.
Now the Energy Information Administration reports that the proven reserves of natural gas increased 32% in the United States during 2021 according to EIA thanks to US oil and gas producers. Proved reserves of natural gas in the United States grew to a new record of 625.4 trillion cubic feet (Tcf) in 2021, a 32% increase from 2020, according to our recently released Proved Reserves of Crude Oil and Natural Gas in the United States, Year-End 2021 report. U.S. proved reserves had previously decreased 4% in 2020 as a response to prices that fell with decreased consumption during the first year of the COVID-19 pandemic. At year-end 2021, however, five of the eight states with the most proved reserves of natural gas each reported new record volumes, driving the growth nationally. Proved reserves are operator estimates of the volumes of oil and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Prices heavily affect estimates of proved reserves. The wholesale spot price for natural gas at the U.S. benchmark Henry Hub in Louisiana averaged $3.89 per million British thermal units in 2021, almost doubling from 2020, according to data from Refinitiv.
The EU continued importing from Russia as well, taking 88,000 t/d last week, compared with 80,000 t/d across the whole of last year. The unusually large volumes of non-Russian imports may be difficult to sustain over a prolonged period. But European traders say their storage tanks are relatively full and demand from buyers has been depressed since November, so they are not worried about securing replacements for Russian diesel next month when the EU ban comes into effect. Most see a structural shortfall in Europe once diesel stocks are run down and demand picks up.
India is the only major non-Russian supplier that has not increased shipments to Europe this month. The EU’s daily intake of Indian diesel and gasoil was lower in January than the 2022 average. Supply from non-Russian sources has been back-loaded in January, with last week’s flurry of arrivals coming on the back of a thin patch in the middle of the month. Across January as a whole, the EU has imported around 119,000 t/d from outside Russia.
Non-Russian diesel in Europe has commanded wider premiums over Asian product in January, with front-month Ice gasoil futures around $60/t above front-month Singapore gasoil swaps on average, up from $45/t in December. But it has lost value against US Gulf coast product in recent weeks, which may start to constrict transatlantic trade.
Big oil is big again! The Wall Street Journal reported that Exxon Mobil Corp. rocketed to its highest-ever annual profit last year, riding surging oil prices to resurrect its status as one of America’s most profitable companies and erase billions of dollars of losses incurred during the pandemic. The largest U.S. oil company turned in record annual earnings of $55.7 billion for 2022 in its quarterly earnings Tuesday, outpacing big banks, tech giants, and vaccine makers. Among companies that have reported fourth-quarter earnings, only Apple Inc. and Microsoft Corp. have surpassed Exxon’s profit in fiscal 2022 so far, and only Google parent Alphabet Inc.. And they do not have to drill in the ocean to make those profits and use fossil fuels to make and ship their products! Will anybody complain about Apple and Microsoft’s profits? No, but you can be sure that the Biden administration will once again complain about Exxon’s profits. They will call on them to reduce prices! Will they also accuse Apple of war profiteering? Or using slave labor in China?
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Today's Futures Heat Map: Strongest: Lumber, Soybean Meal, Palladium, Orange Juice
By: Barchart | January 30, 2023
• Today's Futures Heat Map
Strongest: Lumber, Soybean Meal, Palladium, Orange Juice
Weakest: Natural Gas, Heating Oil, Gasoline, Cotton
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A significant reversal in commodity momentum
By: Dean Christians | January 30, 2023
• For only the eighth time in almost 80 years, the 1-year rate of change for a spot commodity index cycled from > 50% to < 0%. After similar reversals, a commodity index struggled over the next six to twelve months.
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Hog Prices Firming Up Through Midday
By: Barchart | January 30, 2023
Hogs have backed off their initial gains for midday, but are still up by 17 to 65 cents so far. The Feb contract is the outlier with a 37 cent loss through midday. USDA’s National Average Base Hog price was 39 cents higher on Monday morning to $70.25. The 1/26 CME Lean Hog Index was $72.64, up by 12 cents.
Dalian Live Hog Prices fell sharply after the Lunar New Year break. Futures were 315 to 790 yuan/MT lower in the front months on Monday. The back months held firm on limited volume and OI, with Jan ’24 closing up by 450 yuan/MT.
Front month pork cutout futures are mixed on the board, with April up by $1.22 but Feb down by 55 cents. USDA’s National Pork Carcass Cutout value dropped $1.42 in the AM update, to $79.04. USDA estimated last week’s FI hog slaughter as 2.536m head through Saturday. That compares to 2.531 million last week and 2.530 million during the same week last year.
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Wheats Up Through Midday
By: Barchart | January 30, 2023
The midday wheat market is showing 3 to 6 cent gains across the domestic classes. SRW is trading nearly a dime off the earlier highs, but still 3 to 5 1/2 cents in the black. HRW futures are up 5 3/4 to 6 3/4 cents so far, but March is 7 cents below the session high. MPLS Spring wheat pris are working with midday gains of 2 3/4 to 5 1/4 cents so far.
Weekly inspections data had 445,433 MT of wheat shipments for the week that ended 1/26. That was a weekly increase of 96,040 MT and was up by 67k MT from the same week last year. USDA showed nearly half of the total was spring wheat followed by 117k MT of HRW. Japan was the top destination. The weekly report had 13.222 MMT of wheat shipments for the season through 1/26, compared to 13.616 MMT last year.
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Cattle Near Daily Highs At Midday
By: Barchart | January 30, 2023
Live cattle futures are trading triple digits higher so far with April leading the way on a $2.57 gain. USDA confirmed some light catch up business in the WCB on Friday, with sales of $155 - $156. The USDA mentioned activity from $152 to $157 through the week with limited enough volume to not declare a bulk price outside of $155 in NE.
Feeder cattle are trading triple digits higher as well with $1.10 to $1.70 gains through midday. USDA reported light volumes from the OKC Feeder Cattle Auction review citing winter weather. The report had only 2,750 head traded – compared to 9k last week and 11k last year, for prices steady to $3 lower. The CME Feeder Cattle Index for 1/26 was another $0.77 higher to $179.57.
Wholesale Boxed Beef prices were higher in Monday’s AM report with a 7 cent increase to Choice and a $1.14 increase to Select. That had the Chc/Sel spread at $16.15. Last week’s federally inspected cattle slaughter was estimated as 659k head through Saturday. That is up by 13k head from last week and by 4,000 head from the same week last year.
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Double Digit Strength From Soy Market
By: Barchart | January 30, 2023
Beans are on the rally through Monday’s midday with gains of as much as 1.4%. Old crop futures are working 20 cents higher. Meal prices are leading the way with 1.9% to 2.4% gains so far. BO prices are also stronger, gaining 1% through midday.
Local Dalian Soybean Prices were weaker after the Lunar New Year break, fading 9 to 22 yuan/MT in the domestic market. The more import competitive Dalian No2 Soybean Prices were sharply higher after China’s week long break, as the front months saw 36 to 52 yuan/MT gains. Dalian bean prices remain inverted (backwardated) across both classes.
USDA reported 1.855 MMT of soybeans were exported during the week that ended 1/26. That was a 16.6k MT increase from last week and was up by 437k MT from the same week last year. China was the top destination with 76% of the total. The weekly update had the season’s accumulated export at 35.989 MMT through 1/26 – trailing last year by just 461,035 MT.
Brazil’s Patria Agronegocios reported the soy harvest as 5.15% complete, compared to last year’s 11.4% pace.
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Triple Digit Drop In Cotton Market
By: Barchart | January 30, 2023
So far for Monday the cotton board is in the red with triple digit losses. March is leading the way lower with a 203 point pullback on the board. December cotton is down by 169 points and trading near the session’s low. Crude oil is lower, a bearish potential influence on synthetic fiber prices. Equity futures are lower ahead of the FOMC meeting on Tuesday and Wednesday.
The Cotlook A Index for 1/27 was 75 points stronger to $1.02 40/100/lb. The AWP for cotton was raised 262 points to 75.05 cents per pound.
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Arabica Coffee Prices Supported By Supply Concerns
By: Barchart | January 30, 2023
March arabica coffee (KCH23) this morning is up +0.60 (+0.35%), and Mar ICE robusta coffee (RMH23) is down -15 (-0.73%).
Coffee prices this morning are mixed, with arabica climbing to a 1-month high. Concerns about smaller arabica supplies are underpinning prices. Volcafe said because of weak flower blossoms on coffee trees in the Minas Gerais coffee-growing region, it cut its Brazil 2023/24 arabica coffee production estimate to 40.5 mln bags from a July forecast of 49.8 mln bags. Dollar strength today (DXY00) limited gains in coffee prices.
A bullish factor for coffee prices was the January 16 report from Cecafe that showed Brazil's 2022 green coffee exports fell -2.7% y/y to 35.6 mln bags, the lowest in 4 years.
A bullish factor for robusta coffee is shrinking supplies after ICE-monitored robusta coffee inventories today fell to 6,212 lots, the fewest since contract rules changed in 2016.
Robusta also has support after coffee trader Volcafe forecasted that the global 2023/24 robusta coffee market would see a record deficit of 5.6 mln bags as Indonesia, the world's third-largest robusta producer is expected to 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.
An easing of dry conditions in Brazil may boost coffee yields and is bearish for prices. Somar Meteorologia reported today that Brazil's Minas Gerais region received 72.9 mm of rain last week, or 141% of the historical average. Minas Gerais accounts for about 30% of Brazil's arabica crop.
Abundant arabica coffee supplies are negative for prices. ICE arabica coffee inventories have risen steadily since falling to a 23-year low of 382,695 bags on November 3 and posted a 6-3/4 month high of 870,7224 bags last Thursday. Also, Conab on January 19 forecasted the 2022/23 Brazil arabica crop would rise +14.4% to 37.4 mln bags.
Increased coffee exports from Vietnam, the largest robusta producer, are bearish for robusta prices after the General Statistics Office of Vietnam reported on January 9 that Vietnam's 2022 coffee exports were seen up +13.8% y/y at 1.8 MMT.
On the bullish side for coffee prices was the January 4 report from the Colombia Coffee Growers Federation that showed Colombia's 2022 coffee exports fell -8% y/y to 11.1 mln bags. Colombia is the world's second-biggest producer of arabica coffee beans.
On the bearish side, U.S. green coffee inventories are plentiful after the Green Coffee Association on January 17 reported that U.S. Dec green coffee inventories rose +9.3% y/y to 6.38 mln bags.
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.
The International Coffee Organization (ICO) reported on December 2 that global coffee exports in Oct fell -1.9% y/y to 9.87 mln bags.
In a bullish factor, 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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Corn Exports? The Corn & Ethanol Report
By: Daniel Flynn | January 30, 2023
We kickoff the day with Dallas Fed Manufacturing Index at 9:30 A.M., Export Inspections at 10:00 A.M., and 4-Week & 8-Week Bill Auction at 10:30 A.M. We will have a busy week ahead of us with the jobs numbers Thursday and Friday.
On the Corn Front we will be watching Export Inspections as US corn exports are expected to pick up. Much needed rains in Southern Brazil that was forecasted this weekend was close to nil. The chance for rain in Southern Brazil is 0% with winds at 4 mph. Central Brazil may have mild delays this week before a drier system moves in. In the overnight electronic session the March corn is currently trading at 683 ½ which is a ½ of a cent higher. The trading range has been 687 ¼ to 682 ½.
On The Ethanol Front BK-H2 Energy, LLC, was welcomed last week by the Renewable Fuels Association as its newest associate member. BK-H2 Energy, LLC, is a consulting company engaged in the transition of diesel/gas and CNG Vehicles to battery electric and hydrogen fuel cells, collaborating with GOLU
Hydrogen Technologies, which developed a way to use ethanol as feedstock to produce low-cost green hydrogen for fuel cell vehicles and electric power required for charging the battery-electric cars and trucks. Give me coal or natural gas any day. To make batteries possible is coal and natural gas not to mention the raw materials we would be forced to import from our enemies. There were no trades in ethanol futures.
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Deliveries on Energies/Rapeseed Oil/Nymex & Comex
By: The PRICE Futures Group | January 30, 2023
• Tomorrow, Tues Jan 31st is Last Trading Day for Feb Heating Oil, Rbob, MTF Rapeseed and March Murban Oil.
• Tomorrow, Tues Jan 31st is First Notice Day for Feb Nymex and Comex metals.
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It's time to keep an eye on soybeans
By: Jay Kaeppel | January 30, 2023
• In the past 90+ years, soybeans have shown a strong tendency to rally during the year's first half and decline during the second half. They are now entering a typically favorable window. As long as price action holds up, traders may benefit from focusing on the long side of the market. Non-futures traders can also participate by trading an ETF designed to track the price of soybean futures.
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Futures performance in January so far: lumber bid and natural gas slid
By: Markets & Mayhem | January 30, 2023
• Futures performance in January so far: lumber bid and natural gas slid
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Earthshaking. The Energy Report
By: Phil Flynn | January 30, 2023
Oil prices got a nice pop on Sunday night on reports that Israel sent drones to attack an Iranian military factory. This came just after a 5.9 earthquake hit on the Iranian-Turkey border. Coincidence? Yes, but still earthshaking. Will it be enough to shake the oil market out of its slumber?
After an early Sunday night opening price pop, we started to drop on a risk-off trade as there is a lot of news this week that the trade fears can be earthshaking. OPEC plus has a virtual meeting on February 1 and the Federal Reserve is due to make its announcement on interest rates on Wednesday and that’s making the markets a bit nervous. OPEC is not expected to shake things up and is widely expected to roll over its current production cuts. The Fed decision on interest rates really should not be too much of a surprise even though there are some like Dennis Gartman who believes that the Fed will cut by 50 basis points as opposed top the 25 basis cut that the market expects. Mr. Gartman believes that they feel inflation is still a risk based on Fed statements.
Perhaps it is because they see gasoline prices that have been soaring because of increased demand and low refining capacity and the fact that the market must adjust to the reality that Biden’s SPR releases have ended. Triple AAA says that gasoline prices are at 3.508 a gallon. That is up from $3.423 a week ago and up from $3.363 a year ago.
It’s not just gasoline that is surging. AAA says that, “Diesel prices are at 4.676 which is up from 3.908 a month ago and up from $3.717 a year ago. The trend of gas and diesel should continue higher after Exxon Mobil (XOM.N) pushed back its restart of the Beaumont, Texas, refinery, which has been trying to finish a $2 billion expansion that will make it the second largest in the United States. Right now the market really needs 250,000 barrels per day of all new supplies for the refined products market.
Another concern for oil is the risk that will come with EU sanctions on Russian oil and products that starts on February 5th and that is when the embargo on buying Russian oil starts. This should be a bullish act even if it does not cause the oil supply to tighten overnight. The International Energy Agency executive Fatih Birol says Russian oil output could fall by a million barrels a day in 2023. Now when the SPR releases end, the market will feel a bit of a shock as it could not adjust because of Biden’s misuse of the reserve.
The House is trying to respond to Biden’s misuse and abuse of the Strategic Petroleum Reserve. Reuters reported that, “The U.S. House of Representatives passed a bill on Friday limiting the ability of the energy secretary to tap the strategic oil reserve without developing plans to increase the number of public lands available for oil and gas drilling. Representatives backed the bill 221 to 205, with support from only one Democrat. Joe Biden would veto the legislation should it pass Congress, the White House said this week. The bill is expected to face an uphill battle in the Senate, which, unlike the House, is controlled by Biden’s fellow democrats according to Reuters.
Democrats famously blocked President Trump’s attempt to refill the Strategic Petroleum Reserve (SPR) at about $24.00 a barrel. I wrote at the time that would prove to be a mistake that has cost the taxpayers dearly. Now with Biden using the SPR to manipulate the market for political purposes to lower gasoline prices as he released oil even before the war in Ukraine started, it is starting to backfire and we’re seeing that at the gasoline pump as prices start to rise. It’ll be interesting to see if Biden takes credit for the increase in gas and diesel prices that no doubt Americans are feeling right now.
While gasoline prices and diesel prices are up, we’re actually seeing a break in fertilizer prices which is good news considering the fact that we’re entering a period of extremely tight supplies of grain. Warm temperatures have eased natural gas prices and even though natural gas is popping on a return of cold weather, this morning the drop in prices helps fertilize prices come down.
One of the fuels that have fallen is E85 and if you look at the market that is heavily subsidized, it seems to be the cheapest fuel around. Just forget the fact that you don’t get as much bang for your buck as far as mileage goes. Biden is throwing more money at Agra fuels at a time when food supplies globally are very tight. Grain prices are already high and could get much tighter. Reuters reports that, “Chicago soybeans and corn rose on Monday on concern that drought-damaged crops in Argentina were facing more dry weather. Wheat rose as a cold snap in U.S. grain belts generated concern about possible crop damage, while potential escalations in the Russia-Ukraine war also underpinned prices.
So with food and fuel supplies being the tightest they’ve been almost ever globally, with global spare production capacity for oil nonexistent the risk for commodities is still very much to the upside. Those who were doubting the Chinese reopening are reassessing their earlier predictions we believe that now it’s a good time to put on your hedges going into winter. Even the natural gas market that saw a sea change in fundamentals due to a warm winter, as well as a shutdown of the major export terminal Freeport, could start to find some bottoming action here over the next couple of days.
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Soybean oil, wheat and coffee... no trading on margin.
Wheat was strong last week and starting strong tonight.
What I'm Watching In The Grain Markets This Week
By: Barchart | January 29, 2023
I’ve struggled more this week with what to write about than in previous weeks. Of course there is a ton to talk about, but in complete honesty, not much of it has changed from last week.
Yes, I am watching what is happening with the Black Sea Grain Corridor as the West starts sending tanks and other equipment to Ukraine, something Russia calls a ‘blatant provocation.’ With the corridor’s renewal less than 2 months away, it is likely we will start to hear more about a potential closure as Russia knows the corridor is one of the few bargaining chips it has.
I’m also continuing to watch what is happening when it comes to South American production. Harvest looks like it will continue to ramp up across Brazil, with reports of massive soybean yields coming out of Mato Grosso. Some cash traders in the country say the crop in their opinion is working towards 155 mmt, up from the current working trade estimate of around 153 mmt.
Rains in Argentina over the last couple of weeks were relatively decent and relatively widespread, though not enough to cure the drought of course, and not enough to fix the production loss in early planted crops. It will be enough to stabilize later planted production and allow farmers in the country to finish planting corn.
The forecast for the next two weeks turns back dry, with warmer temperatures, making model runs this week for the last half of February that much more important.
And of course, you know I’m trying to gauge Chinese demand as the country reopens and its leaders claim the worst of the Covid infections are over. Many have been surprised recently by the strong pace in soybean sales and shipments, but with many Chinese crushers reportedly running on limited inventory and nearby margins solid, it shouldn’t be surprising importers are ramping up buys.
As of this week China had around 5 mmt of beans purchased from the US but not yet shipped, meaning big export inspections for shipments to China are likely to continue through February. Continued purchases would be bullish, especially with values out of Brazil starting to get cheaper for March forward.
But what I really want to talk about after thinking about it for some time is the situation in corn…
When thinking about the outlook for corn a Robert Frost poem popped into my head. Me, not really a Frost fan was surprised by this, but nonetheless once I googled it, I realized it fit perfectly:
The Road Not Taken
Robert Frost
Two roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth;
While the poem itself is better known for its final lines talking about choosing the road less traveled, the first stanza encapsulates my feelings towards the corn market perfectly. In my opinion we are standing at a fork in the road, one leading to an incredibly bullish outlook, the other, potentially the opposite.
And while I know we can only go down one road, recognizing where it leads only once we get there, I feel like we’re currently standing at the fork, staring at a divergence that could have tremendous implications for price direction.
The knowns in the market feel somewhat comfortable. Thanks to a massive year over year increase in production, Brazil was able to export around 1 billion bushels more into the global market since last summer. Corn demand for ethanol looks like it will stay relatively steady for the most part, as plants continue to try to produce themselves into profitability. Feed demand looks like it could be reduced slightly for wheat feedings, but that appears to be more of a global factor than a domestic one.
Where the paths split is influenced almost solely by exports, with the implications being huge when it comes to price.
Path one is the bullish path, probably the corn growers favorite, and feels like the one most farmers and traders are positioned for. With the surprising reduction in corn production earlier this month, we have lost our buffer when it comes to an uptick in demand.
Yes, export pace is abysmal at best, still running around half of what it was a year ago, but the US is now the cheapest and most reliable supplier for the next several months.
Some analysts in the industry believe the absence of competition combined with an uptick in demand from China and other end users coming in for coverage could result in the US needing to supply upwards of 300 million bushels a month into the global market from February or March out into July, double our recent pace.
This with no loss seen in Brazilian second crop corn production. A production issue in Brazil this year would result in the US being the supplier of necessity well beyond July, something our current supply would have a difficult time supporting.
The second path is the path ‘old corn’ used to take, you know, corn before 2021, inflation, several production issues and a huge spike in demand happened. Down that path exports remain lukewarm at best. Yes, we get demand, we see an uptick in sales pace from both a seasonal standpoint and purely from the fact that our top buyers are running well-behind last year when it comes to purchases, Japan and China the most notable, with purchases down 59% and 68% from a year ago. But it’s nothing better than the current pace, steady, but still barely enough to meet current USDA projections.
My gut tells me we head down path two, I feel like Brazilian exports have replaced US bushels in a big way and that global end users have known the world market would be in this situation for several months, yet don’t seem overly concerned.
However, Brazil is just now beginning to plant its Safrinha crop, which is responsible for 2/3rds or more of its total production, meaning we have a whole lot of time left to be holding our breath. US production matters as well of course, keeping a risk premium necessary.
Going forward, I think the market remains very aware of the two directions we could take, but with demand able to show up seemingly overnight, the threat of path one will keep us supported well into spring.
In the end, I’ve never felt so torn about market potential than I do right now when it comes to corn. Beans have relatively known fundamentals, with the tight supply situation becoming more of a US issue than a global one in the coming months. Wheat, much the same. But corn, corn is likely to keep me up at night wondering what happens and how to manage it for quite some time.
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Wheat Rally Has More Steam
By: Barchart | January 28, 2023
Howdy market watchers! And just like that, we’re already one month into the new year.
For the markets, it has been a rollercoaster start, which likely foreshadows what is to come over the next 11 months.
We appreciate everyone who joined our Sidwell Strategies Marketing Meeting this past week. We had a great turnout and even better conversations about ideas and strategies for the year ahead.
We will be scheduling additional meetings this spring, but as always, feel free to give us a call to discuss insights and ideas for your operation. In addition to market outlook, we talked a lot about break evens and desirable profit levels to consider in making risk management and marketing decisions. Have you ever thought about how much profit you’d like to make, within reason? Of course more is more, but when is enough enough to take some risk off the table? Our team has been pulling historical data to aide your decision making.
We also introduced our Farm Marketing Dashboard to increase your visibility over marketing decisions, what-if scenarios and profit per bushel as actions are taken. Schedule a meeting so that we can introduce this very effective tool to you and your family for the year ahead.
It was a firmer week for agriculture and equity markets while another rocky one for energy contracts. After unjustified technical selling on Monday across grains, it was all up from there for the rest of the week. The US dollar largely chopped sideways holding the January 18th low, but closing lower on the week. US grain exports were strong this week with wheat and soybeans at the top of expectations and corn within expectations. Despite being on Lunar New Year holidays this week, China did purchase US soybeans. This brings China’s purchase of US soybeans to 28.2 million metric tonnes versus 25.4 MMT last year.
Rains in Argentina have continued to pressure soybeans lower. However, there are also rains in the north of Brazil that could delay harvests and may add some underlying support. The recent selloff in soybeans have turned charts looking slightly more bullish after this week’s rebound. Front month contracts are likely to sustain more gains than the November new crop contract. New crop soybean futures closed the week just above $13.51. If we rebound to $13.74 area next week, I believe this is a good area to protect some of your intended acres.
With elevated volatility and premiums higher, selling new crop call options is a good way to lower the cost of downside protection. This goes for new crop corn and wheat in addition to soybeans. Front month corn contracts look much more bullish versus new crop corn with March and May closing above the 200-day moving average. There is a gap above on December corn futures at $5.94 ½ after Monday’s low at $5.83 ¾ exactly held the prior January 12th low.
With Friday’s breakdown in the crude oil market and Argentina rains improving conditions despite indisputable permanent damage in parts of the country, I’m getting increasingly concerned that the $5.95-5.99 on the December new crop contract may be as far up as we get until the next catalyst.
The wheat market was one of the more exciting markets to trade this week for the first time in quite some time. This is amidst welcome moisture across the southern plains largely in the form of snow. That moisture however did not stop the start of short covering by managed funds largely in response to trade headlines. News that Australia’s wheat crop is a new record and likely to result in greater exports created some headwinds early in the week, but couldn’t overcome the news of strong US exports, tensions in the Black Sea and escalating wheat price inflation in China and India.
For the latter, domestic wheat prices in India made new record highs this past week, up seven percent in January alone. Prices last year were up 37 percent following the severe drought. While India’s new crop harvest begins in March with supplies expected to be plentiful, it doesn’t relieve the short-term pinch. There is a similar case in China with the government releasing wheat from reserves.
Chicago and Kansas City wheat contracts posted an inside day on Tuesday after Monday’s selloff followed by a textbook break out to the upside and follow through. Chicago wheat finished Friday with another inside day. Monday’s move will likely see follow through in that direction on Tuesday. KC wheat however made a new high on Friday above Thursday’s high. Both March and May KC wheat contracts closed above the 50-day moving average. July new crop KC wheat basically closed right at the 50-day moving average and within a penny of the prior day’s high.
All else equal, KC wheat charts, in particular, look set to move higher. The $8.75-8.80-level could likely be the next stop. This should be an area for producers to consider downside protection. $8.95 could also be in the cards and we will just have to see how the charts are developing once we’re at $8.80. Again, what is your breakeven and how much (per bushel) do you “want” and “need” to make? We have ideas and so give us a call to get orders ready for this market move.
The cattle market appreciated the early week selloff in feed grains. Feeders made a much needed rebound Monday following on Friday’s turnaround after a 6-session plummet. However, after Monday’s move, the market largely stalled though holding gains to finish out the week.
Tuesday’s semi-annual USDA report on beef cow and calf crop inventory will likely be a market mover. We know that numbers will be tighter, but will the beef cow count in 2022 already be down at 2014 levels or will it take another year? Heifer retention will also be down with the drought far from over and hay supplies down 30 percent across the southern plains. March feeders are likely to stall around $184.00-184.15 as it now looks.
While there are plenty of bulls in the cattle market, I would caution against riding out the next couple of months without protection. This year is definitely different than others, but it is likely to be more volatile as well. Note the FOMC meets this week to decide on interest rates and will announce the decision on February 1st at 1 PM. We are likely to see a 25-basis point increase. Any more than that could see a surprise reaction from the equity market that could transfer through to the cattle market. We will need more fat cattle cash trade this next week to excite live cattle futures.
US GDP for the fourth quarter of 2022 increased at an annual rate of 2.9 percent, compared to 3.2 percent in the third quarter, driven by increases in inventory investment and consumer spending, but offset by declining investment in housing. It is a rare occasion that US and China GDP growth are similar percentages, a sign of the continued toll government reactions to COVID have had on both economies.
Give me a call for strategies to trade these key events coming up before year’s end and get a plan for 2023. If you’re ready to trade commodity markets, give me a call at (580) 232-2272 or stop by my office to get your account set up and discuss risk management and marketing solutions to pursue your objectives. Self-trading accounts are also available. It is never too late to start and there is no operation too small to get a risk management and marketing plan in place.
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Today's Futures Heat Map
By: Barchart | January 27, 2023
• Today's Futures Heat Map
Strongest: Lumber, Coffee, Sugar, Nasdaq 100 E-Mini
Weakest: Heating Oil, Palladium, Crude Oil, Silver
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Grains Report: Wheat, Rice, Corn and Oats, Soybeans
By: Jack Scoville | January 27, 2023
• WHEAT
General Comments: Wheat markets were higher yesterday and trends are now sideways in all three markets. Big Russian production goes against the difficulty of moving grain from the Black Sea due to insurance requirements, but so far the lack of insurance has not increased demand for US Wheat as the Russian Wheat is still moving. There are still ideas of weak demand and big Russian production that should help foster price weakness in the world market. 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. Ukraine is also looking for new business for its crops and Russia is aggressive in the world market as it looks for cash to fund the war. The demand for US Wheat still needs to show up and there is still not enough demand news to help support futures.
Overnight News: The southern Great Plains should get isolated showers. Temperatures should average near to below normal. Northern areas should see scattered snow showers. Temperatures will average near to above normal. The Canadian Prairies should see mostly dry conditions. Temperatures should average above normal.
Chart Analysis: Trends in Chicago are mixed, Support is at 739, 721, and 713 March, with resistance at 760, 766, and 772 March. Trends in Kansas City are mixed. Support is at 842, 828, and 811 March, with resistance at 876, 895, and 901 March. Trends in Minneapolis are mixed. Support is at 885, 876, and 882 March, and resistance is at 925, 930, and 942 March.
• RICE:
General Comments: Rice was higher again yesterday. Futures appear poised to test resistance above the market now. Demand should be a problem for bullish traders moving forward. There is not much going on in the domestic market right now although some Rice moved in Texas at what were called very good prices. Demand in general has been slow to moderate for Rice for both exports and domestic uses.
Overnight News: The Delta should get isolated showers. Temperatures should be near normal.
Chart Analysis: Trends are mixed to up with objectives of 1854 and 1906 March. Support is at 1814, 1801, and 1785 March and resistance is at 1840, 1852, and 1864 March.
• CORN AND OATS
General Comments: Corn and Oats closed higher yesterday. The export demand was solid last week even though demand remains well behind the pace to make USDA objectives. Brazil has been hanging on for its Summer crop but Argentina has suffered through some extreme drought. The Brazil Winter crop is harvested. The Summer crop and gthe Argentine crop is developing under stressful conditions. Weak demand overall for US Corn remains a big problem for the market. There are increasing concerns about demand with the Chinese economic problems caused by the lockdowns creating the possibility of less demand as South America has much better crops this year to compete with the US for sales. China is now moving rapidly to open the economy and allow people to move around with no lockdowns so the demand could start to improve. The improvement might take some time as the Chinese people get Covid, but they should be past this episode in a few weeks and demand might start to improve at that time.
Overnight News:
Chart Analysis: Trends in Corn are mixed. Support is at 673, 669, and 661 March, and resistance is at 685, 689, and 692 March. Trends in Oats are mixed to up with objectives of 386, 391, and 400 March. Support is at 377, 375, and 368 March, and resistance is at 386, 390, and 392 March.
• SOYBEANS
General Comments: Soybeans and the products were all higher yesterday despite the news that Argentina and southern Brazil weather changed to a much wetter pattern over the weekend. More precipitation is expected. Price trends are mw mixed for Soybeans and Soybean Meal as the harvest in Brazil starts to expand in central and northern areas. Current forecasts suggest that the showers currently in the forecast for early this week will make a real dent in the drought. Central and northern Brazil remain in very good condition with scattered showers reported. Production potential for the Brazil is called very strong even with potential problems and losses in the south. Even so, production of less than 150 million tons is possible now although most estimates remain near 153 million tons. Argentine production ideas continue to drop with the drought as planting is delayed and the crops already in the ground are stressed. Production estimates are now closer to 40 million tons than original projections near 50 million. There was news that China has started to ease Covid restrictions after some demonstrations by the Chinese people. Ideas that Chinese demand will improve, but this could take some time as a very large part of the population now has Covid. This has delayed a robust economic return for the country.
Overnight News:
Chart Analysis: Trends in Soybeans are mixed. Support is at 1503, 1474, and 1468 March, and resistance is at 1537, 1548, and 1556 March. Trends in Soybean Meal are mixed. Support is at 453.00, 444.00, and 435.00 March, and resistance is at 463.00, 467.00, and 469.00 March. Trends in Soybean Oil are mixed. Support is at 6000, 5940, and 5850 March, with resistance at 6360, 6470, and 6520 March.
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Softs Report: Cotton, OJ, Coffee, Sugar, Cocoa
By: Jack Scoville | January 27, 2023
• COTTON
General Comments: Cotton was moderately higher yesterday and still remains inside the trading range created over the last couple of months. Futures have been stuck in the same trading range since the beginning of November but are showing bad demand fundamentals. Overall, the demand for US Cotton has not been strong. Some ideas that demand could soon increase as China could start to open its economy in the next couple of months were hurt by news of Covid outbreaks in China. Covid is now widespread in China so the beneficial economic effects of the opening are being delayed but these effects should start to be felt as the people there achieve immunity over the next few weeks.
Overnight News: The Delta will get scattered showers and above normal temperatures. The Southeast will see mostly dry conditions and near to below normal temperatures. Texas will have mostly dry conditions and below normal temperatures. The USDA average price is now 85.64 ct/lb. ICE said that certified stocks are now 8,900 bales, from 8,900 bales yesterday. USDA on Thursday morning said that weekly net Upland Cotton export sales were 213,700 bales this year and 6,100 bales next year. Net Pima sales were 5,400 bales this year and 0 bales next year.
Chart Trends: Trends in Cotton are mixed. Support is at 85.60, 83.20, and 82.00 March, with resistance of 89.00, 89.90 and 92.10 March.
• FCOJ
General Comments: FCOJ was higher yesterday. Trends are mixed as the market seems to be falling back into a trading range after making a spike high after the reports were released. Demand should start to improve now with the holidays now over. Historically low estimates of production due in part to the hurricanes and in part to the greening disease has hurt production remain in place but are apparently part of the price structure now. The weather remains generally good for production around the world for the next crop but not for production areas in Florida that have been impacted in a big way by the two storms. Brazil has some rain and conditions are rated good. Mostly dry conditions are in the forecast for the coming days.
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 mixed. Support is at 201.00, 197.00, and 194.00 March, with resistance at 209.00, 214.00, and 217.00 March.
• COFFEE
General Comments: New York and London closed higher yesterday. The activity in London was diminished as Vietnam and much of Southeast Asia is closed for the Tet holiday or Lunar New Year. Ideas of big production for Brazil continue due primarily to rains falling in Coffee production areas now and as offers stayed strong from Brazil and increasingly from Vietnam. Ideas are that the buy side needs Coffee now. There are ideas that production potential for Brazil had been overrated and reports of too much rain in Vietnam affected the harvest progress. 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. Ideas are that the market will have more than enough Coffee either way when the next harvest comes in a few months.
Overnight News: ICE certified stocks are higher today at 0.870 million70ags. The ICO daily average price is now 164.14 ct/lb. Brazil will get isolated showers in northern areas with near normal temperatures. Central America will get scattered showers. Vietnam will see scattered showers.
Chart Trends: Trends in New York are mixed to up with objectives of 172.00 March. Support is at 159.00, 155.00, and 152.00 March, and resistance is at 169.00, 173.00 and 178.00 March. Trends in London are mixed to up with objectives of 1950 and 2040 March. Support is at 1930, 1910, and 1890 March, and resistance is at 2020, 2060, and 2100 March.
• SUGAR
General Comments: New York and London closed higher yesterday on buying seen in most commodities markets. Rains have returned to much of southern Brazil since the weekend. Cane production prospects should be improved. Good production prospects are seen for crops in central and northern areas. The harvest has been delayed in Thailand. Australia and Central America harvests are also delayed. There is talk that production in India will be reduced this year after some bad weather and reduced yields reported in Maharashtra. Ideas are that India will produce about 34.3 million tons of Sugar this year, about 4% less than the previous outlook.
Overnight News: Brazil will get scattered showers. Temperatures should average near normal. India will get mostly dry conditions and near to above normal temperatures.
Chart Trends: Trends in New York are up with objectives of 2100 and 2160 March. Support is at 2020, 1980, and 1950 March and resistance is at 2080, 2120, and 2150 March. Trends in London are mixed to up with objectives of 573.00 and 603.00 March. Support is at 549.00, 541.00, and 537.00 March and resistance is at 559.00, 562.00, and 565.00 March.
• COCOA
General Comments: New York and London closed higher again yesterday. Weaker demand shown by the grind data that got released last week. Talk is that hot and dry conditions reported in Ivory Coast could curtail mid crop production, but main crop production ideas are strong. Ghana has reported a disease in its Cocoa to hurt production potential there. The rest of West Africa appears to be in good condition. The North American grind was 8.1% lower and the EU and Asian grinds were about 2% lower. Good production is reported for the main crop and traders are worried about the world economy moving forward and how that could affect demand. Supplies of Cocoa are large at ports. The weather is good in Southeast Asia.
Overnight News: Mostly dry conditions 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 scattered showers and near normal temperatures. ICE certified stocks are lower today at 4.929 million bags.
Chart Trends: Trends in New York are mixed. Support is at 2570, 2540, and 2510 March, with resistance at 2670, 2700, and 2730 March. Trends in London are mixed. Support is at 2010, 1990, and 1960 March, with resistance at 2030, 2050, and 2080 March.
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It Ain’t Over. The Energy Report
By: Phil Flynn | January 27, 2023
If you thought the global food and energy crisis was over, well you had better think again, because there are more signs that it might just be getting started. Despite plummeting natural gas prices in US and Europe and the holiday crash in oil prices and grain prices there are warnings all around that we should be getting ready for another leg up.
A historically warm start to winter in Europe seems to have saved Europe from the brink of energy disaster. In the US natural gas prices have plummeted because of warm weather and the closure of the Freeport LNG terminal that left natural gas supplies traded. Market action has some declaring victory and thinks we can offer an all-clear signal.
Yet in Europe, as Breit Bart reported that Ingbert Liebing, the head of the Association of Municipal Enterprises in Germany, has warned the public that gas and electricity prices are more likely to go up than down in the coming months, with his organization expecting prices to soon double once again. “Even in short-term trading, prices are still significantly higher than before the crisis, three and four times higher than in 2020,” the energy boss said in an interview with local publication Neue Osnabrücker Zeitung.
In the US, the fast-tracking of the approval of the restarting of the Freeport LNG terminal is really out of charge with a Biden-led regulatory agency. That means they are signaling that they are in a hurry to restart the plant in part because they still see a risk of global LNG shortages especially as China reopens its economy. This is especially surprising because Freeport basically acknowledged negligence and the Federal pipeline safety regulators blamed inadequate operating and testing procedures, human error, and fatigue for the June 8 explosion that shut Freeport LNG’s export plant in Texas.
Reuters said that the U.S. Federal Energy Regulatory Commission (FERC) and the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) granted Freeport’s request to begin cooling down some of the plant’s piping systems. The procedure to cool down the pipes, which Freeport said would take about 11 days, would be a first step to returning the facility to normal operations after a seven-month outage. FERC said in its filing that “additional authorization to restart operations is necessary to reinstate service … of the liquefaction trains.”
On the oil front, US oil refiner Valero warned that global petroleum demand will continue to outpace global refinery capacity according to Bloomberg.
Reuters reported that Valero Energy Corp zoomed passed Wall Street estimates for quarterly profit on Thursday, wrapping up the refiner’s best year on record, boosted by higher demand for fuel and healthy refining margins as crude supplies remained tight. U.S. refineries operated at record levels last year, aided by a quick recovery in domestic sales and strong export demand following Russia’s invasion of Ukraine. Valero refineries operated at a 97% capacity utilization rate in the fourth quarter, the highest since 2018.
On the food front low global stocks of grain are raising fear of another food price spike as the Biden Administration is spending more taxpayer money on biofuels.
Reuters reports that the U.S. Department of Energy (DOE) on Thursday will announce over $100 million in funding to expand U.S. biofuel production. Yet should that money be going to increase the food supply for the hungry and poor in the world as they might face skyrocketed prices and food shortages?
The war in Ukraine is already reducing supply and weather concerns in South America as well as weather pattern prediction could create a grain global nightmare.
Reuters is reporting that Ukraine’s corn and wheat production is set to fall for a second year in 2023, with corn output not expected to exceed 18 million tons and wheat production 16 million tons. Ukraine’s grain and oilseed crop output may decline to around 50 million tonnes from some 67 million in 2022 and about 106 million in 2021, according to UGA estimates.
They say that corn has been particularly affected by financial constraints as it is relatively expensive to grow, dry and transport, adding about 10% of the 2022 crop remained unharvested as farmers wait for some fields to dry out.
Another sign that supplies are tight is US exports that are very strong as Brazil’s soybean production is now expected to be 3.7% smaller than previously anticipated despite still being a fairly large crop Brazil’s harvest so far is coming in slow but the big picture some weather forecasters are raising alarm changing weather patterns that are increasing the odds of a potential drought.
Talk of La Nina shifting to El Nino some say could cause major problems. Some say it increases the chances of drought, others say it could go either way.
Fox Weather says that La Nina is essentially the cooling of sea surface temperatures in the eastern tropical Pacific Ocean, along the west coast of South America. The cooler surface temperatures in the Pacific are the result of unusually strong eastward-moving trade winds and ocean currents which bring the cooler water to the surface in a process known as upwelling. The process can affect patterns of rainfall, atmospheric pressure, and global atmospheric circulation.
Atmospheric circulation is the large-scale movement of air that together with ocean currents, distributes heat energy on the surface of the Earth. La Nina is known to bring higher-than-normal pressure over the central and eastern Pacific. As a result, drier-than-normal conditions are observed in much of the southern United States.
Fox Weather says that the latest update from the Climate Prediction Center (CPC) favors, with 82% odds, an ending to La Nina and a transition to an El Nino Southern Oscillation (ENSO) neutral pattern from the beginning of February and through May 2023. In an ENSO-neutral phase, tropical Pacific sea surface temperatures are generally close to normal.
However, there are some instances when the ocean can look like it is in a La Nina or El Nino state but the atmosphere is not playing along or vice versa.
Others are saying we are also entering The Gleissberg Cycle For Midwest In 2024-2025. This is known also as the ‘dust bowl” drought cycle.
Forbes reported that” We’re now in Solar Cycle 25, which began in December 2019 when, in retrospect, solar scientists were able to tell the moment of solar minimum. Not surprisingly, solar maximum is predicted to occur midway through Solar Cycle 25, so between November 2024 and March 2026—and most likely July 2025. “The Sun’s activity has quickly ramped up and even though we haven’t reached peak levels in this cycle, the Sun’s activity is already exceeding predictions,” said Nicola Fox, Director of NASA’s Heliophysics Division in a blog last week. “Solar events will continue to increase as we near solar maximum in 2025, and our lives and technology on Earth, as well as satellites and astronauts in space, will be impacted.”
Yet whether a drought occurs global grain stocks are uncomfortably tight. Ending stocks across all crops harvested last year in 2022 are at half the levels seen just four years ago.
Historically, acre-equivalent ending stocks were as low as 28.7 million acres in 2013 and 25.4 million acres in 1995. While a bit off the record lows, the current U.S. stock situation is among the tightest observed since the 1970s according to Thrive. That as the world has many more mouths to feed.
As we have said we are predicting that oil will get back to over $100 a barrel soon. Product prices will also rise. We are going to feel the snap-back effect for premature and unwarranted SPR releases, and it will take more time for the supply side to fix what the Biden administration has broken. Natural gas is still struggling to find a bottom as there is a lot of gas and the weather is still warm.
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Coffee Steaming Again After 4 Months in the Cold
By: Investing.com | January 27, 2023
• Arabica hit a 3-week high after the 20-month bottom of $1.42 a lb on Jan. 11
• Production in top coffee grower Brazil is overrated, say analysts
• Trader Volcafe says world expected to face 3rd straight year of coffee shortage
‘Wake up and smell the coffee,’ the saying goes.
You should probably be checking out the charts of arabica, too — the top bean for the commodity — while doing that.
After four months in the cold, arabica prices are steaming again, with the benchmark March contract on ICE Futures U.S. hitting a three-week high of $1.68 a lb on Thursday after a 20-month bottom of $1.42 per lb on Jan. 11.
Arabica has rallied 10% over the past two weeks — recovering most of its 12% drop over three prior weeks — on concerns about the crop in top coffee grower Brazil.
Arabica Weekly Chart
Charts by SKCharting.com, with data powered by Investing.com
On a monthly basis, arabica prices are flat for January, after deficits of 0.2% in December, 5.6% in November, 19.8% in October, and 7.3% in September.
Said Jack Scoville, chief crop analyst at Chicago brokerage Price Futures Group:
“There are ideas that production potential for Brazil had 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.”
Arabica’s spurt higher comes after coffee trader Volcafe cautioned a week ago that the world would face a shortage in the commodity for a third year in a row due to a lower-than-expected harvest from top grower Brazil.
ED&F Man’s coffee division said in a January report carried by Bloomberg that global coffee supply will likely trail demand by 3.8 million bags in the next season, with the robusta beans used in instant coffee and as a blend in espressos potentially seeing a record shortfall amid surging demand.
The shortfall comes after demand in the current season is seen as outstripping supply by 4.5 million bags, according to the firm.
Adds Volcafe:
“This would imply an unprecedented third consecutive deficit. We expect the tightest period to begin from August 2023 and continue into 2024, with global stocks, especially robusta, falling to record lows.”
Aside from the robusta deficit that could make even traditional brands at the supermarket more costly for consumers, Brazil is also expected to harvest less arabica, the bean favored by Starbucks (NASDAQ:SBUX), which could translate into higher prices at coffee chains and cafes.
Arabica futures reached a decade high in February 2022 following two sub-par crops in Brazil and Colombia and global shipping disruptions. Prices have fallen almost 40% since then, brought down in part by market speculation that Brazilian growers will be gathering a record arabica crop this year.
Brazil now has the potential to only produce 40.5 million bags of arabica for the harvest starting in May, down from a July forecast of 49.8 million bags, Volcafe said, citing blossom issues in key areas of Brazil’s Minas Gerais state, the world’s biggest arabica producing region. The firm also trimmed estimates for the 2022-23 season by 1.1% due in part to frost damage.
Arabica has traditionally been the most popular variety of coffee, but Volcafe said that robusta accounted for 48% of global demand last year, reflected in the tightening supply of the less costly bean type. Arabicas usually command a premium over robustas, but in the past year, that spread has been cut in half amid a shift in blends toward cheaper grades.
The trend of using more robusta is expected to continue as inflation and slowing economic growth spur cost-conscious consumers to less expensive options.
Indonesia, the third-ranked robusta producer, is also expected to see its smallest robusta crop in 10 years next season due to damage from excessive rainfall across its major growing regions. That’ll weigh on the variety’s global deficit, which is forecast to double to 5.6 million bags next season. A bag weighs 60 kilograms.
Volcafe added:
“We predict strong global robusta usage to continue until a sizable shift back to arabica is incentivized either by consumer demand or relative price,”
So, what do arabica’s technical charts say? How well could the premium coffee bean do from here?
Arabica Daily Chart
A test of $1.83, a level last seen in November, could be on the cards next, says Sunil Kumar Dixit, chief technical strategist at SKCharting.com.
He adds:
“Coffee futures weekly chart shows bullish consolidation above the support line of a descending channel which may break above channel resistance line.”
Dixit said arabica’s short-term outlook remains bullish, supported by the 5-Day Exponential Moving Average, or EMA, of $1.62 that crosses over into the Daily Middle Bollinger Band of $1.59 and could overlap with the 50-Day EMA of $1.63.
“Going further, $1.83 will pose the next challenge for coffee bulls.”
On the flip side, if arabica turned lower, short term support will likely be reestablished at $1.55, he said.
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Cotton Fades Day Session Highs, Still Closes Higher
By: Barchart | January 26, 2023
Cotton pulled back for the Thursday close, but still ended up on the day. March had seen 222 point gains at the day’s high, but settled up by 84 points. The other nearby contracts were up by 44 to 78 points at the bell. December remains a 158 point discount to the March.
Cotton export bookings from the week that ended 1/19 were 213,680 RBs according to FAS data. That was a weekly 2% increase but was still ~half of the same week last year. China was the top buyer with 59k RBs leaving their net commitments at 1.877m RBs of the 9.282 million total. Commitments trail last year by 21%.
The Seam had 4,753 bales sold on 1/25 for an average gross price of 81.8 cents. The Cotlook A Index was 101.15 cents/lb for 1/25 which was down by 130 points. The USDA average world price (AWP) for cotton was raised 262 points this afternoon to 75.05 cents per pound. It will be in effect until next Thursday. ICE Certified Stocks were 8,900 bales as of 1/18.
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Hogs Bounce Back On Thursday
By: Barchart | January 26, 2023
Lean hogs saw new lows for the move on Thursday before rallying back to close up by triple digits. April saw a wide $3.70 range on the day and closed at $87 flat on a near 2% gain. USDA’s National Average Base Hog price for Thursday afternoon was $1.10 higher to $72.27. The CME Lean Hog Index was up by 21 cents to $72.32 for 1/24.
USDA reported pork export sales were 44,674 MT for the week that ended 1/19. That was a 5-wk high led by Mexican and Chinese purchases. Pork commitments were then 287,458 MT as of 1/19.
Pork cutout futures closed with $0.92 to $1.15 gains on Thursday, save for the Feb contract which was 15 cents in the red. USDA’s National Pork Carcass Cutout value was $1.35 in the PM report, up by $1.35. USDA estimated the week’s FI hog slaughter at 1.954m head through Thursday. That is 128k head more than last week’s pace and is up by 81k head compared to the same week last year.
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KC Wheat Extends Rally With 2% Gains
By: Barchart | January 26, 2023
The wheat markets pushed higher on Thursday, led by the KC HRW market. Futures closed up by 1.97% to 2.55% on the day, with March up by 21 1/2 cents. CBT SRW also pushed higher with gains of 1.5% to 1.65%. The new crop HRW to SRW spread is now at an 86 1/4 cent premium, compared to a $1.12 1/4 spot premium and the July ’23 Chicago contract’s premium in March last year. At the close, spring wheat futures were up by 6 3/4 to 8 1/2 cents.
Oats Futures Prices also saw Thursday strength with gains of 7 1/4 to 8 1/4 cents. That left the July contract at a new high for the year.
USDA reported wheat export sales were 500,249 MT for the week that ended 1/19. Japan and Mexico were the top buyers for the week. By class white wheat led the charge with nearly 200k MT. Accumulated wheat commitments were 16 MMT as of 1/19, which remains 7% under last year’s pace.
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Thursday’s Corn Trades Higher
By: Barchart | January 26, 2023
Front month corn futures ended the Thursday session with 1 3/4 to 2 1/2 cent gains for new crop and as much as 7 3/4 cent gains for old crop and the bull spreads working. March settled 3 cents under its session high. The new crop discount is now 92 1/2 cents March to Dec.
The BAGE reported corn condition ratings for Argentina at 12% good/excellent, from 5%, and 39% poor, improved from 47% last week by recent rains.
Corn export sales for the week that ended 1/19 were 910,400 MT. That was a drop of 20% from last week but was within the range of estimates. Corn export shipments were reported at 912.6k MT for the week, leaving the accumulated export at 12.012 MMT of the season. Total corn commits were 946.36 mbu through 1/19 – or 50% of USDA’s full year forecast. China holds 28% of the season’s commitments compared to their 28% of last year’s commitments which were 71% of the Jan WASDE (70% of final).
Weekly EIA data had 1.012m barrels of ethanol production per day through the week that ended 1/27. That was a 4k bpd increase from the prior week and was a 5-wk high. Ethanol stocks were up by 1.5675 million barrels compared to the prior week at 25.077 million barrels.
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Soy Prices Rally On Thursday
By: Barchart | January 26, 2023
The soymeal market led the way on Thursday’s soy strength. Meal prices were 1.6% to 2.5% higher at the close with March up by $11.60/ton. Soy oil prices closed up by 22 to 25 points. Soybean futures saw a 21 cent gain for March as the front months closed up by 0.5% to 1.4%. The new crop beans were left behind widening the Nov discount to $1.71 compared to March.
Under the daily reporting system, USDA reported 106k MT of new crop soybeans were sold to China this morning.
The Argentine soy crop was rated 4% points higher on Buenos Aires Grains Exchange’s good/excellent rating this week, to 7%. The portion of the crop rated poor was at 54%, improved from 60% last week.
The weekly FAS export sales report showed 1.146 MMT of old crop beans were sold during the week that ended 1/19. That was the high end of estimates, and was 16% above last week and 11% higher yr/yr. China was the week’s top buyer, with 940k MT booked including 386k MT switched from unknown. China has 28.24 MMT of soybeans for the 22/23 MY book, or 61% of the total. The season’s commitments were sitting at 86% of the WASDE forecast – compared to 79% last year (which had commitments at 75% of the final for the week of Jan 20th).
USDA reported meal bookings at 303,934 MT for the week of 1/19. Soybean oil export sales were 2,231 MT – which was a 5-week high but still 89% below the same week last year.
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Commodity Mission Accomplished. The Energy Report
By: Phil Flynn | January 26, 2023
Global commodity markets were lulled into a false sense of security believing that the global oil, diesel, corn, and copper shortages might have been alleviated. Yet while some believe that global central banks killed the commodity supercycle, they had better think again.
Let’s start with oil. Many still believe that China’s economic reopening will somehow go very badly. The predictions are that rising covid cases will again lock down the country or make so many people sick that factories will not function. Yet despite these early fears, the evidence seems to be going against those dire forecasts. Not only did OPEC raise its Chinese demand forecast by 510,000 bpd in 2023 which I think is a lowball estimate, the International Energy Agency (IEA) is predicting that a Chinese reopening will boost oil demand globally by 101.7 million barrels a day, well above pre-covid levels and a record for global oil demand.
From what I am hearing from my Chinese contacts, we will see a major ramping up of activity after the Lunar New Year festivities and while covid cases are rising, my sources are saying it is not as devastating as some were predicting. That means that more than likely Chinese oil demand will surprise the upside.
Many have misunderstood what a commodity super cycle is. We will see peaks and valleys in the commodity markets but ultimately when we look at markets like copper and corn, and oil, underinvestment, and demand outstripping supply, will keep commodities in a strong multi-year uptrend. I expect to see a very significant squeeze in prices this year as the super cycle took a rest but is gearing up for another run.
As far as corn goes, we’re seeing significant ethanol demand. There are concerns that weather patterns in Brazil are going to turn dry ahead of the corn growing season in Brazil. In the US the USDA in their last report lowered the size of the US 2022 corn crop more than expected and the USDA lowered the US 2022 soybean crop more than expected. They also lowered US exports but that may change as China ramps up in the new year. Grain contacts I am talking to believe China is getting ready to ramp up purchases of many grains. One contact I am speaking with thinks there is a real possibility that corn could double in price within two years. He said it might even go higher if some of the long weather cycle predictions of a cycle of dry weather come true.
Concerns of food shortages are still real and have not gone away despite the recent pullback in price. While we may see South American harvest pressure, there are real risks growing of another significant food price spike. Last month Reuters reported that, “One in five Africans – a record 278 million people – were already facing hunger in 2021, according to data from the U.N. Food and Agriculture Organization (FAO). It says the situation has worsened. The number of East Africans experiencing acute food insecurity – when a lack of food puts lives or livelihoods in immediate danger – has spiked by 60% in just the last year, and by nearly 40% in West Africa, according to the World Food Programme (WFP). Last year, the U.N. organization’s Food Price Index hit the highest level since its records began in 1961, according to FAO data.
While there has been a lot of focus on the oil risk surrounding the Russian war with Ukraine, we might have to focus on the grain risk escalation of the war as sending more weapons to Ukraine could increase the risk that Russia will cut off food supplies.
The other risk of course with the Russian war is oil. The EU price caps go into effect in February and currently prices are below the price cap so there might not be a risk. I would fully expect at some point though prices of oil are going to test the price cap and also test the resolve of Europe to live by the price caps as supplies more than likely we’ll tighten significantly next year. In the US we should be concerned about tight supplies. The slight build and oil inventory seemed to suggest that oil crude oil inventories are about 3% above the five-year average for this time of year, the reality is that when you take into account that we drew down the Strategic Petroleum Reserve by 219,000 million barrels from a year ago, we’re in a very tight market situation and much more prone to upside price shocks.
Diesel price shocks are also on the cards. Refining margins have been near record highs despite the fact that refiners have as much incentive as they can, it’s a little hard to produce a lot of diesel when your refineries are shut down. The EIA reported that distillate fuel inventories decreased by 0.5 million barrels last week and are about 20% below the five-year average for this time of year. Total motor gasoline inventories increased by 1.8 million barrels from last week and are about 8% below the five-year average for this time of year.
On the flip side, natural gas prices have been plummeting. Last week’s optimism about the Freeport LNG terminal taking steps to reopen was offset by the fact that winter continues to be mild. Weather forecast models from Europe and the United States seem to suggest that the temperature outlook heading into the second week of February was warmer than before. The combination of the Freeport closure and warmer weather look real concerns about an undersupplied market and put it into the camp of a possible oversupply. There is one story out there that could give us a little bit of support but has yet to be confirmed. There were some reports by traders that at least one operator whose gas production feeds Howard Energy Partners (HEP), pipeline, and an associated gas plant … that ultimately moves gas into Mexico … is shutting in a huge amount of gas production (100 mmcfpd) in their Webb Co. operations in deep south Texas. We will keep an eye on this.
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Are commodities set for another significant period of outperformance vs stocks?
By: Markets & Mayhem | January 26, 2023
• Are commodities set for another significant period of outperformance vs stocks?
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Today's Futures Heat Map
By: Barchart | January 25, 2023
• Today's Futures Heat Map
Strongest: Coffee, Sugar, Hard Red Wheat, Cotton
Weakest: Natural Gas, Palladium, Gasoline, Heating Oil
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Deliveries on Metals/Nat Gas/Energies/Rapeseed Oil
By: The PRICE Futures Group | January 25, 2023
• Friday Jan 27th is Last Trading Day for Jan Metals and Feb Nat Gas.
• Tues Jan 31st is Last Trading Day for Feb Heating Oil, Rbob, MTF Rapeseed and March Murban Oil.
• Tues Jan 31st is First Notice Day for Feb Nymex and Comex metals.
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Grains Report: Wheat, Rice, Corn and Oats, Soybeans
By: Jack Scoville | January 25, 2023
• WHEAT
General Comments: Wheat markets were higher yesterday and all three markets climbed back inside the recent trading range to negate the new down move. Big Russian production goes against the difficulty of moving grain from the Black Sea due to insurance requirements, but so far the lack of insurance has not increased demand for US Wheat as the Russian Wheat is still moving. There are still ideas of weak demand and big Russian production that should help foster price weakness in the world market. 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. Ukraine is also looking for new business for its crops and Russia is aggressive in the world market as it looks for cash to fund the war. The demand for US Wheat still needs to show up and there is still not enough demand news to help support futures. The weekly export sales report last week did show improved sales.
Overnight News: The southern Great Plains should get scattered showers in southern sections. Temperatures should average near to below normal. Northern areas should see isolated showers. Temperatures will average near to above normal. The Canadian Prairies should see isolated showers. Temperatures should average above normal.
Chart Analysis: Trends in Chicago are mixed to down with objectives of 704, 691, and 689 March, Support is at 713, 702, and 696 March, with resistance at 740, 760, and 766 March. Trends in Kansas City are mixed. Support is at 811, 802, and 792 March, with resistance at 840, 850, and 861 March. Trends in Minneapolis are mixed. Support is at 890, 885, and 876 March, and resistance is at 907, 918, and 923 March.
• RICE:
General Comments: Rice was mixed to higher yesterday, with March trading a little lower most of the session. Demand should be a problem for bullish traders moving forward and he export sales report released on Friday morning showed negative net sales. There is not much going on in the domestic market right now although some Rice moved in Texas at what were called very good prices. Demand in general has been slow to moderate for Rice for both exports and domestic uses.
Overnight News: The Delta should get isolated showers. Temperatures should be near normal.
Chart Analysis: Trends are mixed to up with objectives of 1854 and 1906 March. Support is at 1801, 1785, and 1776 March and resistance is at 1833, 1840, and 1852 March.
DJ USDA World Market Rice Prices – Jan 25
USDA today announced the prevailing world market prices
of milled and rough rice, adjusted for U.S. milling yields
and location, and the resulting marketing loan gain (MLG)
and loan deficiency payment LDP) rates. Source: USDA
—–World Price—– MLG/LDP Rate
Milled Value Rough Rough
($/cwt) ($/cwt) ($/cwt)
Long Grain 17.49 11.00 0.00
Medium/Short Grain 17.15 11.40 0.00
Brokens 10.17 —- —-
This week’s prevailing world market prices and MLG/LDP
rates are based on the following U.S. milling yields and
the corresponding loan rates:
U.S. Milling Yields Loan Rate
Whole/Broken ($/cwt)
(lbs/cwt)
Long Grain 54.28/14.78 7.00
Medium Grain/Short Grain 60.31/10.41 7.00
• CORN AND OATS
General Comments: Corn and Oats closed higher yesterday with a change in the weather in South America the main fundamental news for traders. The export demand was great last week, but demand remains well behind the pace to make USDA objectives. Brazil has been hanging on for its Summer crop but Argentina has suffered through some extreme drought. Southern Brazil and Argentina got some significant and very welcome rains over the weekend with totals to 1.5 inches. More is in the forecast for later this week. The Brazil Winter crop is harvested. Weak demand overall for US Corn remains a big problem for the market. There are increasing concerns about demand with the Chinese economic problems caused by the lockdowns creating the possibility of less demand as South America has much better crops this year to compete with the US for sales. China is now moving rapidly to open the economy and allow people to move around with no lockdowns so the demand could start to improve. The improvement might take some time as the Chinese people get Covid, but they should be past this episode in a few weeks and demand might start to improve at that time. China is celebrating the Lunar New Year so the government and most business are closed this week.
Overnight News: Undonown destinations bought 100,000 tons of US Corn.
Chart Analysis: Trends in Corn are mixed to down with objectives of 656, 642, and 636 March. Support is at 669, 666, and 661 March, and resistance is at 678, 689, and 693 March. Trends in Oats are mixed. Support is at 361, 351, and 346 March, and resistance is at 375, 377, and 380 March.
• SOYBEANS
General Comments: Soybeans and the products were all mixed to a little lower yesterday as Argentina and southern Brazil weather changed to a much wetter pattern over the weekend. The market tried to rally early in the day session, but failed when new selling from South America was noted. More precipitation is expected later this week. Price trends are down for Soybeans and Soybean Meal as the harvest in Brazil starts to expand in central and northern areas. Current forecasts suggest that the showers currently in the forecast for early this week will make a real dent in the drought. Central and northern Brazil remain in very good condition with scattered showers reported. Production potential for the Brazil is called very strong even with potential problems and losses in the south. Even so, production of less than 150 million tons is possible now although most estimates remain near 153 million tons. Argentine production ideas continue to drop with the drought as planting is delayed and the crops already in the ground are stressed. Production estimates are now closer to 40 million tons than original projections near 50 million. China has been closed so far this week for the Lunar New Year and will not open again until next week. Ideas that Chinese demand will improve, but this could take some time as a very large part of the population now has Covid. This has delayed a robust economic return for the country.
Overnight News: Unknown destinatios bought 130,000 tons of US Soybeans.
Chart Analysis: Trends in Soybeans are down with objectives of 1469 and 1428 March. Support is at 1474, 1468, and 1460 March, and resistance is at 1502, 1513, and 1523 March. Trends in Soybean Meal are down with objectives of 450.00 and 429.00 March. Support is at 457.00, 453.00, and 444.00 March, and resistance is at 469.00, 474.00, and 481.00 March. Trends in Soybean Oil are mixed. Support is at 6050, 5940, and 5850 March, with resistance at 6220, 6360, and 6470 March.
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Softs Report: Cotton, OJ, Coffee, Sugar, Cocoa
By: Jack Scoville | January 25, 2023
• COTTON
General Comments: Cotton was lower yesterday but still remains inside the trading range created over the last couple of months Futures have been stuck in the same trading range since the beginning of November but are showing bad demand fundamentals as China and the rest of Southeast Asia are on holiday for the Lunar New Year. Overall, the demand for US Cotton has not been strong. Some ideas that demand could soon increase as China could start to open its economy in the next couple of months were hurt by news of Covid outbreaks in China. Covid is now widespread in China so the beneficial economic effects of the opening are being delayed but these effects should start to be felt as the people there achieve immunity over the next few weeks.
Overnight News: The Delta will get scattered showers and near normal temperatures. The Southeast will see scattered showers and near normal temperatures. Texas will have mostly dry conditions and near to below normal temperatures. The USDA average price is now 84.53 ct/lb. ICE said that certified stocks are now 8,900 bales, from 8,900 bales yesterday.
Chart Trends: Trends in Cotton are mixed. Support is at 85.60, 83.20, and 82.00 March, with resistance of 89.00, 89.90 and 92.10 March.
• FCOJ
General Comments: FCOJ was a little lower yesterday. Price action has been weak since a late week rally last week and trends could start to turn down in the short term. DJ News highlighted the tough environment in Florida for production this year and demand more generally in recent years in an article published on Wednesday. Trends are mixed as the market seems to be falling back into a trading range after making a spike high after the reports were released. Demand should start to improve now with the holidays now over. Historically low estimates of production due in part to the hurricanes and in part to the greening disease has hurt production remain in place but are apparently part of the price structure now. The weather remains generally good for production around the world for the next crop but not for production areas in Florida that have been impacted in a big way by the two storms. Brazil has some rain and conditions are rated good. Mostly dry conditions are in the forecast for the coming days.
Overnight News: Florida should get mostly dry conditions. Temperatures will average above normal. Brazil should get scattered showers and near normal temperatures. ICE said that 0 contracts were delivered against January futures and that total deliveries for the month are now 10 contracts.
Chart Trends: Trends in FCOJ are mixed. Support is at 201.00, 197.00, and 194.00 March, with resistance at 209.00, 214.00, and 217.00 March.
• COFFEE
General Comments: New York was higher and London also closed high yesterday. The activity in London was diminished as Vietnam and much of Southeast Asia is closed for the Tet holiday or Lunar New Year. It seemed to rally mostly in sympathy with New York. Brazil offers have increased but offers from Vietnam are less now as the Tet holiday gets under way. Ideas of big production for Brazil continue due primarily to rains falling in Coffee production areas now and as offers stayed strong from Brazil and increasingly from Vietnam. Ideas are that the buy side needs Coffee now. There are ideas that production potential for Brazil had been overrated and reports of too much rain in Vietnam affected the harvest progress. 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. Ideas are that the market will have more than enough Coffee either way when the next harvest comes in a few months.
Overnight News: ICE certified stocks are unchanged today at 0.858 million bags. The ICO daily average price is now 159.08 ct/lb. Brazil will get isolated showers in northern areas with near normal temperatures. Central America will get scattered showers. Vietnam will see scattered showers.
Chart Trends: Trends in New York are mixed to up with objectives of 162.00 and 172.00 March. Support is at 155.00, 152.00, and 150.00 March, and resistance is at 163.00, 166.00 and 169.00 March. Trends in London are up with objectives of 1950 and 2040 March. Support is at 1910, 1890, and 1880 March, and resistance is at 1950, 1970, and 2020 March.
• SUGAR
General Comments: New York and London closed a little higher yesterday. Ideas are that mills in Brazil will be encouraged to produce more Sugar than Ethanol due to policy changes proposed by the Lula administration. Ethanol profit margins could be squeezed by the moves. The harvest has been delayed in Thailand. Australia and Central America harvests are also delayed. There is talk that production in India will be reduced this year after some bad weather and reduced yields reported in Maharashtra. Ideas are that India will produce about 34.3 million tons of Sugar this year, about 4% less than the previous outlook. The weather in Brazil remains good for the next crop. World Sugar is expected to be in a big surplus production next year.
Overnight News: Brazil will get scattered showers. Temperatures should average near normal. India will get mostly dry conditions and near to above normal temperatures.
Chart Trends: Trends in New York are mixed. Support is at 1950, 1930, and 1890 March and resistance is at 2000, 2030, and 2050 March. Trends in London are mixed. Support is at 541.00, 537.00, and 535.00 March and resistance is at 555.00, 559.00, and 562.00 March.
• COCOA
General Comments: New York and London closed lower yesterday in range trading on news that the rainy season has started in West Africa. Nigeria reported very good rains over the weekend. Weaker demand shown by the grind data that got released last week. Talk is that hot and dry conditions reported in Ivory Coast could curtail mid crop production. The North American grind was 8.1% lower. The European grind was 1.7% lower and the Asian grind was 0.25 lower. There are still reports of dry weather in West Africa that could hurt production potential. Good production is reported for the main crop and traders are worried about the world economy moving forward and how that could affect demand. Supplies of Cocoa are large at ports. The weather is good in Southeast Asia.
Overnight News: Mostly dry conditions 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 scattered showers and near normal temperatures. ICE certified stocks are higher today at 4.951 million bags.
Chart Trends: Trends in New York are mixed. Support is at 2570, 2540, and 2510 March, with resistance at 2630, 2670, and 2700 March. Trends in London are mixed to down with objectives of 1940, 1910, and 1900 March. Support is at 1990, 1960, and 1930 March, with resistance at 2030, 2050, and 2080 March.
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Corn Rallies On No Fresh News. The Corn & Ethanol Report
By: Daniel Flynn | January 25, 2023
We kickoff the day with MBA Mortgage Refinance Index, MBA Purchase Index, and MBA Mortgage Applications at 6:00 A.M., EIA Energy Stocks at 9:30 A.M., 2-Year FRN Auction and 17-Week Bill Auction at 10:30 A.M., 5-Year Note Auction at 12:00 P.M., Dairy Products Sales and Milk Production at 2:00 P.M.
On the Corn Front prices moved forward with no new fundamental news to drive it. There were no significant weather changes in South America. The USDA announced the sale of 130 tons (5 million bushels) of corn to unknown destinations. The U.S. market could be ripe for exports to pick up as Brazil has exported old crop and corn crop #1 and will have to hold exports until crop #2, this should trigger more exports in the coming months. In the overnight electronic session the March corn is currently trading at 678 ½ which is 1 ½ of a cent lower. The trading range has been 681 to 676 ½.
On the Ethanol Front biofuels in Australia remained low in 2022. Despite new fuel standards last January, the ethanol blend rate did not increase according to a report filed with the USDA Foreign Agricultural Service’s Global Agricultural Information Network. Biodiesel consumption is also very low. According to the report, Australia currently has only three ethanol plants, a number that is at least a decade old.
Capacity use was at 38.9% last year, flat 2020 and 2021. There were no trades or open interest in ethanol futures.
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Today's Futures Heat Map
By: Barchart | January 24, 2023
• Today's Futures Heat Map
Strongest: Lumber, Hard Red Wheat, Palladium, Wheat
Weakest: Natural Gas, Heating Oil, Crude Oil, Gasoline (Energy w/ the clean sweep)
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Weak Dollar Spurs Short Covering In Coffee
By: Barchart | January 24, 2023
March arabica coffee (KCH23) on Tuesday closed up +1.30 (+0.82%), and Mar ICE robusta coffee (RMH23) closed up +2 (+0.10%).
Coffee prices Tuesday recovered early losses and settled moderately higher, with arabica posting a 2-week high and robusta posting a 3-month high. A weaker dollar Tuesday fueled some short covering in coffee futures.
A bullish factor for coffee prices was last Monday's report from Cecafe that showed Brazil's 2022 green coffee exports fell -2.7% y/y to 35.6 mln bags, the lowest in 4 years.
An excessive short position in arabica coffee futures could fuel short covering pressures after last Friday's weekly Commitment of Traders (COT) report showed funds boosted their net-short arabica coffee positions by 10,308 the week ended January 17 to a 3-year high of 40,480.
Robusta coffee has support from supply concerns. Last Thursday, Conab forecasted the 2023 Brazil robusta crop would fall -3.8% to 17.4 mln bags. Also, tighter current supplies are bullish for robusta after ICE-monitored robusta coffee inventories fell to a 4-1/2 year low Tuesday of 6,266 lots.
Robusta also has support after coffee trader Volcafe forecasted that the global 2023/24 robusta coffee market would see a record deficit of 5.6 mln bags as Indonesia, the world's third-largest robusta producer is expected to 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.
An easing of dry conditions in Brazil may boost coffee yields and is bearish for prices. Somar Meteorologia reported Monday that Brazil's Minas Gerais region received 71.9 mm of rain last week, or 170% of the historical average. Minas Gerais accounts for about 30% of Brazil's arabica crop.
Abundant arabica coffee supplies are negative for prices. ICE arabica coffee inventories have risen steadily since falling to a 23-year low of 382,695 bags on November 3 and posted a 6-1/2 month high of 859,564 bags last Thursday. Also, Conab last Thursday forecasted the 2023 Brazil arabica crop would rise +14.4% to 37.4 mln bags.
Increased coffee exports from Vietnam, the largest robusta producer, are bearish for robusta prices after the General Statistics Office of Vietnam reported on January 9 that Vietnam's 2022 coffee exports were seen up +13.8% y/y at 1.8 MMT.
On the bullish side for coffee prices was the January 4 report from the Colombia Coffee Growers Federation that showed Colombia's 2022 coffee exports fell -8% y/y to 11.1 mln bags. Colombia is the world's second-biggest producer of arabica coffee beans.
On the bearish side, U.S. green coffee inventories are plentiful after the Green Coffee Association last Tuesday reported that U.S. Dec green coffee inventories rose +9.3% y/y to 6.38 mln bags. Also, Conab on December 15 raised its 2022 Brazil coffee production estimate to 50.9 mln bags from a 50.4 mln bag estimate in Sep, up +6.7% y/y.
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.
The International Coffee Organization (ICO) reported on December 2 that global coffee exports in Oct fell -1.9% y/y to 9.87 mln bags.
In a bullish factor, 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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Cocoa Prices Slip On Ample Ivory Coast Supplies
By: Barchart | January 24, 2023
March ICE NY cocoa (CCH23) on Tuesday closed down -23 (-0.88%), and March ICE London cocoa #7 (CAH23) closed down -9 (-0.45%).
Cocoa prices Tuesday posted moderate losses as ample cocoa supplies from the Ivory Coast weighed on prices. Monday's report from the Ivory Coast government showed that Ivory Coast farmers sent a cumulative 1.51 MMT MT of cocoa to Ivory Coast ports for the 2022/23 marketing year from October 1 through January 22, up +9.4% y/y. The report eases concerns that the Harmattan winds are damaging West African cocoa crops.
Losses in cocoa Tuesday were limited by smaller cocoa exports from Nigeria after the Cocoa Association of Nigeria reported Nigeria's Dec cocoa exports fell -0.7% m/m and -73% y/y to 36,571 MT. Nigeria is the world's fifth-largest cocoa bean producer.
Last Friday, NY cocoa fell to a 1-month low, and London cocoa dropped to a 5-week weak on global cocoa demand. Last Thursday, the National Confectioners Association reported that Q4 North American cocoa grindings fell -8.1% y/y to 107,130 MT. Also, the European Cocoa Association reported last Thursday that European Q4 cocoa grindings fell -1.7% y/y to 359,577 MT. Last Wednesday, the Cocoa Association of Asia said Asia Q4 cocoa grindings fell -0.2% y/y to 230,806 MT.
NY cocoa has underlying support from tighter cocoa supplies. ICE-monitored NY cocoa inventories held in U.S. ports have trended lower over the past four months and fell to a 9-month low on January 3. Also, ICE-monitored cocoa stockpiles held in EU ports remain at a 9-month low of 112,880 MT.
Cocoa prices have seen support from concern about the quality of some West African cocoa crops. Cocoa farmers continue to struggle with the lack of fertilizer and pesticides as the war in Ukraine has limited Russian exports of potash and other fertilizers worldwide.
The quarterly report from the International Cocoa Organization (ICCO) on December 1 was bullish for cocoa prices after ICCO said global 2021/22 cocoa production fell -6.8% y/y to 4.89 MMT as unfavorable weather and disease hampered cocoa yields. ICCO revised its 2021/22 global cocoa production figure downward by -67,000 MT from the September figure.
ICCO on September 1 raised the 2021/22 global cocoa deficit to -230,000 MT from a June forecast of -174,000 MT. In 2020/21, global cocoa production rose to a record 5.24 MMT, and the global cocoa market was in a surplus of +215,000 MT.
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Sugar Prices Gain After Brazil Boosts Ethanol Prices
By: Barchart | January 24, 2023
March NY world sugar #11 (SBH23) on Tuesday closed up +0.18 (+0.91%), and March London white sugar #5 (SWH23) closed up +0.30 (+0.05%).
Sugar prices Tuesday closed moderately higher. Tuesday's action by Brazil's state-owned oil company Petrobras to raise gasoline prices by more than +7% to distributors is supportive of ethanol prices. The increase in ethanol prices may prompt Brazil's sugar mills to boost ethanol production at the expense of sugar.
Sugar prices also had carry-over support from Monday's EU court ruling that banned the use of the pesticide neonicotinoids, which is considered harmful to bees. The court's ruling may make European farmers reluctant to plant sugar beets, reducing EU sugar production.
Sugar prices are being undercut by concern India might boost its sugar exports. India's Food Secretary Chopra said last Thursday that India has the potential to allow additional sugar exports and will assess domestic demand before deciding whether to allow more sugar exports next month.
Earlier this month, NY sugar posted a 2-1/2 month low on an improved sugar supply outlook. Unica reported on Jan 11 that Brazil's 2022/23 sugar production through December rose +4.4% y/y to 33.462 MMT. Brazil is the biggest sugar producer in the world. Also, the India Sugar Mills Association (ISMA) reported last Tuesday that India's 2022/23 sugar production from Oct-Jan 15 rose +4% y/y to 15.7 MMT. India is the world's second-largest sugar exporter.
Higher sugar output in India is bearish for prices. On Oct 24, the ISMA forecasted that India's 2022/23 sugar production (Oct 1-Sep 30) would climb +2% y/y to 36.5 MMT as Indian farmers boosted their planted cane acreage by +5.4% y/y to 5.6 mln hectares. In 2021/22, India's sugar production rose +2.9% y/y to 35.8 MMT. Also, robust sugar exports from India are bearish for prices after India 2021/22 sugar exports jumped +57% y/y to a record 11 MMT.
In a bullish factor, StoneX Financial said Dec 14 that due to a delay in Thailand's sugar harvest, projections for Thai sugar exports of 1 MMT to 2 MMT this quarter "will not materialize." Also, India's Sugar Mills Association (ISMA) said that it sees India's sugar mills diverting 4.5 MMT to 5.0 MMT of sugar to ethanol production in 2022/23.
Reduced sugar production in Europe is another supportive factor for prices, as that may force European sugar and food manufacturers to import sugar, leading to tighter global supplies. The European Association of Sugar Manufacturers on Dec 8 forecasted that EU 2022/23 sugar output would fall -7% y/y to 15.5 MMT.
In a bearish factor, the International Sugar Organization (ISO) on Nov 22 projected that global 2022/23 sugar production would climb +5.5% y/y to a record high of 182.1 MMT. Also, ISO projected that the 2022/23 global sugar market would be in a surplus of +6.2 MMT.
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Lumber Exiting Its Slumber ? "Log" Scale
By: Nautilus Research | January 24, 2023
• Lumber Exiting Its Slumber ?
"Log" Scale.
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Agriculture Master Report
By: Bill Moore | January 24, 2023
MAR BEANS
Widely forecast Argentine rains actually happened over the W/E – forcing heavy fund liquidation of bean & meal positions – as the mkt quickly shredded its formidable “weather premium” off the biggest rain event in months! In addition, Brazil’s harvest of its record crop (150 MMT?) is going well! And finally, China is on holiday for a week due to its Lunar New Year Celebration! The trifecta turned out to comprise the perfect bearish storm! Still, exports have been growing more respectable of late – last Friday’s inspections were a solid 986,000 MT & todays export sales came in at an impressive 1.8 MMT – following last week’s 2.1 MMT! So, an export rebound seems to be underway!
MAR CORN
Much like its sister mkt Beans, Corn is also undergoing a double-digit drubbing – as the best rains in 7 months have descended upon the drought-ravaged Argentine crops -coupled with China’s week-long holiday hiatus – both forcing sharply lower values! But, at the same time, also similar to beans, there exists optimism on the export front! Today inspections were 727,000 MMT & Friday’s sales were 1.2 MMT! The reason for the rebound is the plummeting US Dollar – which has recently rendered US Gulf Corn on a par with its S/A counterparts! As well, even though China is out of pocket this week, they are re-opening – after their Covid issues – which should bolster US exports! And the outsides are also lending support – the DJI has rallied 6000 points since last October despite “doom & gloom” recession forecasts & crude oil has rallied $12 since Mid-Dec bolstering ethanol demand!
MAR WHT
Rain brought wheat down yesterday – with moisture in the plains & Midwest helping the winter crop & rain in Argentina pulling down corn & beans – with spill-over pressure into the wht complex! Also, Russia’s record wht crop & abundance of cheap, exportable supplies has helped to keep a lid on wht prices! But today, Turnaround Tuesday has emerged in corn & beans off the promise of an improved export picture – and their strength is helping to buy wht prices! As well, the US Dollar continues its relentless slide – potentially helping wht’s export picture in the 1st Qtr!
FEB CAT
The clear upside leader in the meat complex is cattle – mostly fueled by a bullish supply scenario! The largest decline in production from the 4th Qtr to the 1st Qtr – at 375 million pounds (ly-84) – since Feb 2019 – coupled with decent demand – has underpinned this mkt since last Fall! Re-enforcing that shortfall was last Friday’s Cattle-on-Feed – which showed placements at 91% of last year! That has enabled Feb Cat to hover just $1.50 off its contract highs!
FEB HOGS
At the other end of the spectrum is Feb Hogs – who has no friends anywhere! Since late Dec, the Feb Hog contract has lost $15.00 (91.50-76.50) mostly due to supply woes & lackluster demand! Normally, pork production declines from the 4th Qtr to the 1st Qtr but this year, it’s expected to increase significantly! However, the mkt is currently egregiously oversold & sheer bargain-hunting could force a sharp correction!
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