Grain Markets and Other Stuff Joe Vaclavik

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🔔 Breaking News 🔔 - A potential rail strike in Canada threatens to shake up supply chains across North America. Over 9,000 workers from Canadian Pacific Kansas City and Canadian National Railway are on the brink of a strike, demanding increased rest periods. Despite the rail companies making offers, negotiations have stalled with the union rejecting these proposals. These two rail giants represent nearly 90% of the industry's profits and over 75% of the railroad transport volume. The strike deadline is looming on May 22. Stay tuned as we follow this developing story.

🌧️ Weather Update 🌧️ - Heavy rain has returned to the central US, affecting states like Iowa, Minnesota, Nebraska, and North Dakota. A strong system also covers the Gulf Coast, signaling an active weather pattern that could continue for more than 10 days. Detailed weather maps below show predictions for more rain across the Corn Belt next week.

🌾 Ethanol Production Rises 🌾 - US ethanol production has seen a boost, with weekly output rising to 1 million barrels, a 3.5% increase from last week. However, despite a drop in ethanol stocks, the overall trend shows a significant year-over-year increase. Implied gasoline demand is fluctuating, with recent figures suggesting a decline compared to last year. Check out the latest charts below for a detailed analysis.

⛽ Oil Market Fluctuations ⛽ - Oil prices have plummeted to a seven-week low, with WTI crude dropping by 3.6% amid unexpected increases in US crude stocks and geopolitical developments. Diesel and gasoline futures have also dipped to their lowest since July 2023. We break down the factors driving these price changes and what it might mean for the market.

💹 Federal Reserve's Economic Outlook 💹 - The Federal Reserve has decided to maintain interest rates, with Fed Chair Jerome Powell indicating that rate cuts could be on the horizon depending on job market trends. Despite inflation pressures, the Fed is adjusting its strategy in hopes of achieving a 2% inflation rate. Dive into the discussion with our detailed analysis of the Fed's latest moves and economic projections.

📈 Stay Updated 📈 - Don’t forget to like, subscribe, and turn on notifications to keep up with all the latest developments. Comment below with your thoughts or questions!

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Updated Guidance on SAF Subsidies: The Biden administration released updated guidance on Sustainable Aviation Fuel (SAF) subsidies, now allowing biofuels made from corn, soybeans, and other agricultural products in SAF production. To qualify for SAF tax credits, producers must demonstrate that their fuel emits at least 50% fewer emissions than petroleum-based jet fuel. Ethanol used in SAF production must originate from farms implementing climate-smart agricultural practices like efficient fertilizer application and no-till farming. This guidance aims to incentivize environmentally sustainable practices in biofuel production. 🌱✈️

Rainfall Patterns in Central US: Rain is forecasted to return to portions of the central US on Thursday and Friday, with heaviest amounts expected in Iowa, Missouri, Wisconsin, southeast Nebraska, and eastern Kansas. The 10-day forecast projects wet conditions across almost the entire central US and the US Corn Belt, with significant rainfall totals predicted. These rains could benefit agricultural regions but may also cause delays in fieldwork. 🌧️🌽

Delayed Wheat Shipments to Egypt: Vessels carrying wheat bound for Egypt have been delayed in Russian ports for weeks despite being inspected and approved for shipment. Each vessel is carrying about 60,000mt of wheat purchased from Russian grain exporter TD RIF. Issues with Russian federal authorities granting clearance have resulted in delays, impacting hundreds of thousands of grain shipments. This delay could affect wheat supply chains and global grain markets. 🚢🌾

Sharp Decline in ADM Shares: Shares of Archer-Daniels-Midland (ADM) fell sharply on Tuesday, dropping as much as 5.5%, following the company's announcement of reduced profit expectations for the year. Factors contributing to the decline include decreased farmer sales, abundant grain supplies, and increased imports of alternative feedstocks for biofuel production. ADM's first-quarter earnings also fell by 30% compared to the previous year, highlighting ongoing challenges facing the company. 📉💼

Federal Reserve's Interest Rate Decision: The Federal Reserve is expected to hold interest rates steady following its meeting today, signaling that rate cuts are unlikely in the near future. Officials project a more patient approach to rate adjustments, aiming to ease inflation toward the Fed's target of 2%. This stance suggests that the Fed is not considering rate hikes at this time, emphasizing a cautious approach to monetary policy amid economic uncertainties. 🏦📈

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Decline in US Share of China's Soybean Market: This year, the US share of China's soybean market is expected to further decline, partly due to a bumper soybean crop in Argentina. Argentina is forecast to produce 50mmt of soybeans, double last year's production during a historic drought. Additionally, competitive prices from the Brazilian soybean crop will also hold a significant share of China's market. Last year, the US share of the Chinese market fell to 24%, with Chinese traders anticipating further decline due to concerns surrounding the US presidential election. 🌱📉

Strike of Argentine Oilseed Union: The Argentine Oilseed Crushers Union initiated a strike on Monday in response to a bill introduced by Argentina's president, Javier Milei. The bill proposes measures to reduce the minimum salary subject to income tax and includes labor reform. Milei aims to address high inflation and public spending since taking office in December, but opposition from the center-left and unions has impeded progress. The strike is expected to continue through today as Congress debates the legislation. ⚖️🇦🇷

Rainfall Patterns in US Corn Belt: Rainfall moved over far eastern areas of the US Corn Belt this morning, with more rain forecasted for Iowa, Minnesota, Wisconsin, Nebraska, eastern Kansas, and northern Missouri over the next 5 days. These rains may return to the western Corn Belt and other regions by Thursday, potentially hindering planting progress but also helping to alleviate drought conditions. 🌧️🌽

Progress of US Corn and Soybean Planting: US corn planting is ahead of schedule, with 27% of the crop planted nationally as of Sunday, surpassing the 22% average. Similarly, soybean planting progress is ahead, with 18% of the crop planted compared to the 10% average. However, some states still lag behind in planting progress, while others are well ahead. 🌱🚜

Winter Wheat Ratings and Crop Progress: US winter wheat ratings declined slightly last week, with 49% of the crop rated good-excellent. Despite this decline, the rating was in line with expectations and the highest for this time of year since 2020. Meanwhile, the spring wheat crop is progressing well, with 34% planted compared to the 19% average. 🌾📉

US Grain Shipments: Corn shipments declined last week, with 1.2mmt inspected for export, down from the previous week and compared to the same period last year. Similarly, soybean shipments were soft, while wheat shipments saw a slight increase compared to the previous week and a significant rise compared to the same period last year. 🚢🌾

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Midwest Tornado Outbreak: Over the weekend, a flurry of tornadoes wreaked havoc across the Midwest. On Friday alone, 106 tornadoes tore through six states, causing widespread destruction, particularly in Nebraska and Iowa. Despite the catastrophic damage, few injuries were reported, and fortunately, there were no fatalities. However, on Saturday, several tornadoes struck Oklahoma, resulting in extensive structural damage and sadly, four fatalities along with numerous injuries. The affected communities are now in the process of recovery and rebuilding. 🌪️🏘️

Fund Traders Adjust Corn Positions: According to the latest Commitment of Traders data released by the CFTC, fund traders have reduced their net short position in the corn market. During the week ending April 23, they were net buyers of 46k contracts of corn, though the net short position remains historically large at 226k contracts. A similar trend was observed in soybeans, with fund traders being net buyers of 17k contracts, while maintaining a historically large net short position. Meanwhile, they were net buyers of 20k contracts of SRW wheat. 🌽💼

Impact of Biofuel Feedstock Imports on Soybean Market: The rise in biofuel feedstock imports, including alternatives like used cooking oil, tallow, and canola oil, has led to reduced demand for soybean oil. Consequently, crush margins have declined, prompting earlier seasonal maintenance closures of soybean processing plants. Despite government incentives driving soybean crush expansion, concerns over excess capacity have emerged due to heightened competition. In January, soybean oil accounted for a record-low 32% of feedstocks used for biodiesel production. 🌿🔧

Drought Threatens Russian Wheat Crop: Russia's wheat-growing regions are facing drought conditions, particularly in southwestern Russia, which could impact this year's wheat crop. Some industry experts have lowered their crop forecasts due to the adverse weather. While central Russia's spring planting and winter grain crops are expected to fare better, the overall grain harvest in Russia is projected to decline to 132mmt from 144.9mmt last year. 🌾🇷🇺

Inflation and Consumer Spending: The core PCE price index, the Federal Reserve's preferred gauge of inflation, surged in March, exceeding expectations with a 2.8% gain on an annual basis. Consumer spending also saw a significant increase last month, rising by 0.5%, driven by a strong labor market. This combination of high inflation and robust consumer spending is likely to deter the Federal Reserve from cutting interest rates in the near future. 💲💹

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USDA's Weekly Drought Monitor: Light to moderate precipitation across the Corn Belt last week brought relief to many areas, improving conditions in parts of Minnesota, Missouri, Illinois, Michigan, and Wisconsin, as well as in parts of Iowa. However, dry conditions persisted in southern Missouri and western Kentucky, leading to expanding drought conditions in those areas. Additionally, above-normal temperatures and dry weather in the High Plains worsened conditions in central and western Kansas, the panhandle of Oklahoma, and eastern South Dakota. Drought remains a concern for various agricultural sectors. 🌧️🌾

US Wheat Futures Rally: US wheat futures rallied on Thursday, with the Jul24 Kansas City contract gaining over 10 cents and reaching its highest close since late December. The rally, which has seen the contract gain nearly $1 per bushel since early March, has been influenced by factors such as developments in the Black Sea region, potential Indian imports, and declining US crop ratings. The contract has closed higher for six consecutive days, reflecting market optimism. 🌾📈

Upcoming Climate Model for Ethanol Producers: The Biden administration is set to release a climate model next Tuesday that will determine how ethanol producers can qualify for Sustainable Aviation Fuel (SAF) subsidies through climate-smart agriculture practices. These practices include the use of cover crops, efficient tilling, and fertilizer application. The model is expected to be more restrictive for corn ethanol than initially anticipated, according to reports from Reuters earlier this month. 🌱🛢️

US Economic Growth Slows: US economic growth in the first quarter fell to a level not seen in almost two years, with GDP increasing at a 1.6% annualized rate, below economists' projections. Inflation rose more than expected during the same period, with the personal consumption expenditure price index climbing to 3.7%. The service sector's 5.1% increase was the main driver of inflation. These developments may lead to increased pressure on the Federal Reserve to delay rate cuts further and even consider raising rates. 📉💰

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India's Wheat Stocks at 16-Year Low: India's wheat stocks have dropped to their lowest level in 16 years due to two consecutive years of lower crop yields. The Indian government is selling record amounts of stocks to increase local supply and lower domestic prices. Untimely rainfall in northern India has delayed purchases by state-run agencies, leading to a 25% decrease compared to last year. If stocks aren't replenished, India may need to import wheat for the first time since 2017. 🌾🇮🇳

Rain Returns to Central US: Rainfall is expected to return to the central US today and tomorrow, with the highest totals forecasted for Missouri, eastern Kansas, northwest Oklahoma, and western Nebraska. The 5-day forecast indicates significant rainfall for Iowa, Illinois, Minnesota, Wisconsin, South Dakota, and North Dakota, while Indiana and Ohio will be drier. The active weather pattern may continue for at least a week, causing delays in fieldwork. 🌧️🌽

Bird Flu Detected in Grocery Store Milk: Grocery store milk has tested positive for bird flu, although the virus in pasteurized milk wasn't infectious. Starting Monday, the USDA will require dairy cattle to be tested for bird flu before being moved across state lines, focusing mainly on lactating cattle. Some cows infected with bird flu have not fully recovered their ability to produce milk, impacting the dairy industry. 🥛🐦

US Ethanol Production Declines: US ethanol production declined last week, with weekly output down 3% from the previous week and 6.8% lower compared to the same week last year. Ethanol stocks were slightly down from the previous week but up compared to the same week last year. Implied gasoline demand also decreased compared to the previous week and the same week last year. 🌽🛢️

USDA Weekly Export Sales Report: USDA will release its weekly Export Sales report today, with pre-report estimates suggesting varying figures for corn, soybeans, and wheat. Analysts will closely monitor the report for insights into current marketing year trends and export demand. 📈🌾