Grain Markets and Other Stuff Joe Vaclavik

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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. 📈🌾

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Rain Returns to US Corn Belt: Rainfall is expected to return to the US Corn Belt on Thursday and Friday, with coverage extending across Iowa, Minnesota, Wisconsin, Illinois, Missouri, eastern South Dakota, and Nebraska. However, eastern areas like Indiana and Ohio will experience drier conditions. Increased rainfall may slow corn and soybean planting in affected areas. 🌧️🌽🌱

Improvement in Panama Canal Transit: Increased rainfall has led to improved transit through the Panama Canal, with average daily vessel crossings rising to 25 from 21 in late January. While still below pre-drought levels, the canal authority expects daily transits to reach 31 by mid-May and 32 by June. This uptick in vessel crossings will help alleviate global trade restrictions, with normal operations expected to resume by the end of this year or early next year. 🚢⛈️

Decline in Ukrainian Grain Output: Ukrainian grain output is forecasted to decline due to heavy rainfall delaying spring planting by 20% compared to last year. Reduced planted wheat acres have led to a projection of 19.9 million metric tons for Ukraine's wheat crop, down 11% from last year and significantly lower than the five-year average. The decline is attributed to farmers turning to more profitable crops amidst ongoing geopolitical tensions. 🇺🇦🌾

Russia's Response to US Military Aid: Russia plans to intensify its attacks on Ukraine in response to new US military aid, following the passage of a $61 billion foreign aid package by the US House. The aid includes economic and military support for Ukraine, with the US set to begin shipping battlefield and air defense support pending Senate approval. Russia has stated that Western-supplied weapons to Ukraine are valid targets, further escalating tensions. 🇷🇺🇺🇸💥

US Consideration of Sanctions Against Chinese Banks: The US is considering sanctions against Chinese banks that support Russia's military, amid concerns that Beijing has been supplying Russia with dual-use goods. These goods, such as plane parts and machines, could aid Russia in rebuilding its military capabilities. US sanctions would target banks facilitating transactions for such goods, potentially cutting them off from the global financial system and causing them to fail. 🇺🇸🇨🇳💰

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US Winter Wheat Ratings Decline: US winter wheat ratings dropped sharply last week, with the crop rated 50% good-excellent nationally, down from 55% the previous week and below analysts' expectations. However, it marked the highest rating for this time of year since 2021. Poor to very poor ratings increased to 16%, up from 13% the prior week. The crop's progress in heading also increased to 17% nationally. 🌾📉

US Corn Planting Ahead of Schedule: US corn planting is progressing ahead of schedule, with 12% of the crop planted nationally compared to 10% on average. Notable progress is seen in states like Kansas, Missouri, and Texas. However, some states like Colorado and Michigan lag behind in planting progress. Soybean planting is also ahead of average, with 8% of the crop planted nationally, led by states like Arkansas and Illinois. 🌽🌱

Brazilian Ethanol Arrives for SAF Production: Brazil's first shipment of sugarcane ethanol has reached the US for sustainable aviation fuel (SAF) production at LanzaJet's plant in Georgia. LanzaJet opts for Brazilian ethanol due to its lower carbon score, until US corn ethanol improves its environmental credentials. Several Brazilian mills have met SAF production certifications, indicating potential future shifts in feedstock usage. 🇧🇷🛢️🛫

Strong US Corn Shipments: US corn shipments surged last week, with 1.6 million metric tons inspected for export, marking a 73% increase compared to the same week last year. Soybean shipments remained steady, while wheat shipments decreased from the previous week but rose compared to the same week last year. 🚢🌽

ADM CFO to Resign: The former CFO of ADM, Vikram Luthar, has agreed to resign after being suspended in January amid an SEC investigation into the company's accounting practices. Luthar's departure follows a significant decline in ADM's shares and market value. Despite his resignation, he will receive his annual cash performance incentive award for 2023. 🏦📉📉

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Limited Rainfall in US Corn Belt: Rainfall will be limited over the next few days, with return expected later in the week. A significant accumulation of 1-3" of rain forecasted in western Corn Belt, Wisconsin, Illinois, and Michigan during the 5-10 day period, potentially alleviating drought conditions, particularly in Iowa. Below-normal temperatures expected in the eastern Corn Belt this week. 🌧️🌽🌾

Brazilian Dominance in Chinese Market: Brazilian corn and soybeans maintain dominance in the Chinese market. China's soybean imports from the US plummet by 50% in March, while Brazilian soybean imports surge by 81%. Chinese corn imports from Brazil also spike by 72%, with US imports plunging by 78%. High prices and reduced feed demand contribute to the decline in Chinese imports. 🇨🇳🌽🌱

Large Net Short Position Held by Fund Traders: Fund traders maintain historically large net short positions across the grain complex. Net sales of corn and soybeans contracts, along with SRW wheat, persist. The CFTC's weekly Commitment of Traders data reveals continued bearish sentiment. 📉💼💵

US House Passes Foreign Aid Package: The US House of Representatives approves a $95 billion foreign aid package, with significant allocations for Ukraine, Israel, and Taiwan. Senate expected to vote on and pass the bill, despite requests to include US border legislation. House also approves bill to ban TikTok unless parent company divests from app. 🏛️💰🤝

Neutral Cattle on Feed Report: Friday's Cattle on Feed report viewed as neutral and somewhat supportive of the cattle market. Cattle on feed slightly lower than anticipated, with placements significantly lower than expected. Marketings also below pre-report estimates, contributing to the report's neutral to somewhat friendly outlook. 🐄📊📈

Flash Sales Reported by USDA: USDA reports multiple flash sales, including corn sales to Mexico and soybean sales to unknown destinations for both the current and upcoming marketing years. The sales contribute to ongoing export activity amidst changing market dynamics. 🌽🚢🌱

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Futures and options trading involves risk of loss and is not suitable for everyone.

Improvements in Drought Conditions Across Corn Belt: Widespread precipitation alleviates drought conditions in the majority of the Corn Belt, particularly in southern Illinois, western Kentucky, northeast Iowa, and Michigan. However, flash drought conditions emerge in parts of Kansas and Oklahoma. 🌧️🌽🌾

Israel's Drone Strike in Iran: Israeli drones struck targets in western Iran, with Iran claiming the strike was unsuccessful. Despite initial market rallies in crude oil and wheat futures, prices quickly retreated. 🇮🇷🇮🇱🛸

Argentina's Corn Crop Estimate Reduced: USDA lowers its estimate for Argentina's corn crop to 51mmt, citing stunt disease, dry weather, and reduced planted acres. Forecast for the 2024/2025 season predicts further decline to 48mmt with fewer planted acres due to disease and lower prices. 🌽🇦🇷📉

Expansion of E15 Sales Expected: EPA set to announce temporary expansion of E15 sales from June 1 to September 15, following senators' push for increased energy security amid geopolitical tensions. Earlier approval for year-round sales in eight Midwestern states starting April 2025. 🌽⛽🔋

Bitcoin Halving Impact: J.P. Morgan Chase and Deutsche Bank suggest bitcoin halving won't boost prices, but rather prompt unprofitable miners to exit, leading to market consolidation. Regulatory changes and Federal Reserve rate cuts expected to maintain high bitcoin prices. 🪙📉📈