Lower Energy Prices Weigh on Commodity Valuations

MORNING AG OUTLOOK

Mostly lower trade across the Ag space this AM as lower energy prices weigh on commodity valuations.  The New York Times reports the Trump Administration has delivered a 15 point peace plan to Iran to end the conflict.  The plan was presented to Iranian officials via Pakistan.  No news on Iran’s reaction to the proposal.  Spot WTI crude oil is down $5.35 a barrel near $87 while still holding within yesterday’s range.  Spot RBOB is down $.21 per gallon with HO off $.42.  The EPA is expected to announce their long awaited policies on US biofuel blending quota’s and SRE’s by the end of the month, perhaps as early as Friday’s agricultural event at the White House.  Next Tues. brings USDA Mch. 1^st stocks data along with prospective plantings.  The surge in input costs due to the closure of the Strait of Hormuz likely to shift some corn acres into soybeans.  Moderate to heavy rains are expected across the central US and ECB over the next week.  Dry across the WCB and plains.  Extended forecasts continue to suggest above normal temperatures and precipitation for much of the nation’s midsection.  Forecasts for SA remain mostly favorable.  Rains in Argentina to favor EC and southern growing areas over the next week.  Scattered rains in S. Brazil with heavier pockets in the north.  More rains are needed for the interior South ahead of their dry season in May.  The US $$ is moderately lower while US stock indices are up roughly 1%.

Corn: 

May-26 is down $.03 ½ at $4.59 while Dec-26 is off $.03 at $4.86, both holding above this week’s low.  Look for May-26 to hold in a $4.40-$4.80 range with energy likely to drive any directional breakout. The EPA is expected to show ethanol production ticked up to 323 mil. gallons LW, up from 321 mil. the previous week.

Soybeans: 

May-26 beans are up $.04 ½ at $11.59 ½ while Nov-26 is $.02 ½ higher at $11.46 1/2.  For now May-26 beans rejected trade into new lows for the week.  May-26 meal is up less than a buck at $323 while oil is down 43 points at 65.30.  Moderate speculative buying this week likely to have taken the MM long position in soybean oil to record high at roughly 137k contracts.   With Pres Trump’s trip to Beijing likely delayed until late April at the earliest and US Gulf offers still $1 bu. over Brazilian FOB offers I see the odds of significant Chinese buying of old crop soybeans as very low.  This while China/Brazil have reached an agreement to drop the zero-tolerance for the presence of weeds in Brazilian soy shipments.  Anec forecasts Brazil will export 15.9 mmt of soybeans in Mch-26, while down from their previous forecast of 16.32, it would still represent an all-time high and above the 15.3 mmt shipped in Mch-25.

Wheat: 

Prices range from $.05-$.09 lower with CGO the leader to the downside.  CGO May-26 is down $.08 ½ at $5.81 ½ while KC May-26 is down $.06 at $5.98, both holding support just above this week’s low.  The 6-10 and 8-14 day outlooks show above normal precipitation across the US plains, which would be of great benefit to the winter crop emerging from dormancy. Acres have fallen from the January forecast to March est. 3 of the past 4 years.  SovEcon raised their Russian export forecast for 25/26 MY 1.1 mmt to 46.5 and their forecast for  26/27 MY 2.1 mmt to 43.8.

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