Grain Markets and Other Stuff Joe Vaclavik

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In this week's market update, we dive into the significant shifts in commodity markets driven by severe weather events and economic indicators. Join us as we explore the impact of heavy rainfall in Brazil's Rio Grande do Sul, leading to devastating floods and potential losses in soybean production. Meanwhile, in the US, an active weather pattern continues to slow fieldwork across the Corn Belt, impacting planting progress and market sentiment.

We analyze the latest USDA flash sale of soybeans and its implications for global trade dynamics, shedding light on the ongoing market trends in agricultural commodities. Additionally, we delve into the recent release of US labor market data, which fell short of expectations, signaling a slowdown in job growth and wage increases.

Don't miss out on the insights and updates shaping commodity markets. Watch now to stay informed and make informed decisions in your trading strategies. Subscribe for weekly updates and stay ahead of the curve in agricultural commodities trading. 🌾📊

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Grain Markets and Other Stuff Links-

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

In this week's market update, we delve into the significant shifts in grain and oilseed futures driven by recent weather events and market dynamics. Join us as we explore the impact of heavy rains in Brazil's Rio Grande do Sul, disrupting harvests and raising concerns over crop quality and yield losses. Meanwhile, in Argentina, the Buenos Aires grains exchange has slashed its forecast for the corn crop due to damage caused by leafhoppers and unfavorable weather conditions.

Back in the US, the release of the USDA's weekly drought monitor data highlights the mixed effects of recent rainfall on drought conditions across the Corn Belt and High Plains. While some regions saw improvements, others faced deteriorating conditions, impacting crop outlooks and market sentiment.

We also analyze the latest USDA export sales data, examining the trends in corn, soybean, and wheat sales and their implications for global trade dynamics. Additionally, we explore the role of fund traders in driving sharp rallies in grain and oilseed futures, shedding light on their positioning and market influence.

Don't miss out on the insights and updates shaping the grain and oilseed markets. Watch now to stay informed and make informed decisions in your trading strategies. Subscribe for weekly updates and stay ahead of the curve in agricultural commodities trading.

Joe's Premium Subscription: www.standardgrain.com

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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. 💲💹