Grains Report 03/20/2023

WHEAT
General Comments: Wheat markets were higher last week as negotiations with Russia to extend the grain corridor deal with Ukraine are just now getting started. Russia is talking about a short term extension while everyone else wants one for at least 120 days. Russia has won this round as news reports over the weekend say that the export agreement is open for another two months or so. Reports say that Russian offers continue to hit the world market and world prices. Trends turned up on the daily charts but remain down on the weekly charts. The problem remains demand as world supplies are not so large and US inventories are less. Ideas that big Russian offers and cheaper Russian prices would be a feature for a while in the world market was the driving force for the weaker prices, and price weakness could continue. Ideas are that both Australia and Russia are harvesting record to near record Wheat crops this year. Russia has a large production and is undercutting most world prices in the international 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.
Overnight News: The southern Great Plains should get isolated showers. Temperatures should be near to below normal. Northern areas should see isolated showers. Temperatures will average below normal. The Canadian Prairies should see isolated snow showers. Temperatures should average below normal.
Chart Analysis: Trends in Chicago are mixed to up with objectives of 749 and 594 May.. Support is at 6704, 692, and 683 May, with resistance at 712, 728, and 743 May. Trends in Kansas City are up with objectives of 866 May. Support is at 821, 809, and 804 May, with resistance at 837, 853, and 862 May. Trends in Minneapolis are up with objectives of 865 and 888 May. Support is at 840, 831, and 814 March, and resistance is at 869, 880, and 887 May.

RICE:
General Comments: Rice was higher last week and trends are up on the charts. Demand has been good from domestic sources. Export demand has been uneven but was a marketing year high in the most recent weekly export sales report. Demand has been an issue for the market all year. 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. Markets from Texas to Mississippi are called quiet. Demand in general has been slow to moderate for Rice for exports. Planting is active in Texas and southern Louisiana.
Overnight News: The Delta should get isolated showers. Temperatures should be below normal.
Chart Analysis: Trends are up with no objectives. Support is at 1714, 1695, and 1665 May and resistance is at 1749, 1762, and 1772.

CORN AND OATS
General Comments: Corn closed higher last week and short term trends are up. News that China had bought almost 2.0 million tons of US Corn over several days last week was positive for higher prices. Oats were higher after trading in a very small trading range last week. US prices are currently very competitive with those from South America as Brazil concentrates on Soybeans exports and not Corn and US demand could improve because of the price differentials. Prices from South America should now remain strong as countries there concentrate on Soybeans exports, so the US has a chance now to see export demand improve. The Brazil Winter crop is harvested and China has been buying the surplus. The Summer crop and the Argentine crop is developing under stressful conditions. Tt has been wet so the Soybeans harvest has been delayed and the Safrinha Corn planting is becoming delayed as well. Brazil sources say that 20% of the Winter crop could be planted outside of the ideal window so yields could be hurt in the end. NOAA is forecasting that La Nina will develop this Summer and replace El Nino. US growing conditions are usually good when this happens.
Overnight News:
Chart Analysis: Trends in Corn are up with objectives of 651 May. Support is at 629, 622, and 619 May, and resistance is at 639, 645, and 648 May. Trends in Oats are mixed. Support is at 338, 333, and 328 May, and resistance is at 353, 358, and 361 May.

SOYBEANS
General Comments: Soybeans and Soybean Meal were lower last week as the Brazil harvest makes it way to the market but the Argentine harvest gets reduced again. Soybean Oil was higher but held to a trading range. Reports from Brazil show that basis levels there are under pressure due to the large crop being harvested now. Forecasts from NOAA for very good growing conditions in the Midwest were also a factor. Soybeans export demand is flowing to Brazil now. Argentina is the world’s largest exporter of Soybeans products while the US and Brazil battle for supremacy in Soybeans exports. It remains hot and dry in Argentina and crop conditions are getting worse. Production ideas there are still dropping and the Rosario exchange now estimates production near 27 million tons. The Buenos Aires Grain Exchange said production could be between 25 and 27 million tons. Weather is becoming less important now as the harvest is already underway in central and northern Brazil and will spread south soon. Central and northern Brazil have seen harvest operations interrupted with too much rain but the weather is now improving and the harvest pace is increasing. Production potential for the Brazil is called very strong even with potential problems and losses in the south. Argentine production ideas continue to drop with the drought as planting is delayed and the crops already in the ground are stressed.
Overnight News:
Chart Analysis: Trends in Soybeans are mixed to down with objectives of 1458 and 1408 May. Support is at 1462, 1458 and 1439 May, and resistance is at 1500, 1516, and 1538 May. Trends in Soybean Meal are mixed to down with objectives of 462.00 and 446.00 May. Support is at 462.00, 457.00, and 447.00 May, and resistance is at 475.00, 485.00, and 490.00 May. Trends in Soybean Oil are mixed. Support is at 5650, 5540, and 5510 May, with resistance at 5820, 5850, and 5880 May.

CANOLA AND PALM OIL
General Comments: Palm Oil closed lower last week on weakness in Chicago and despite demand concerns and on ideas are that prices can remain elevated due to bad weather in Malaysia and the potential for increased demand from India and especially China. The market closed lower today on weaker outside markets. Weekly chart patterns are sideways. Indonesia is now revoking some export permits to keep internal prices controlled and to support the bio fuels industry. The controls are expected to last through Ramadan. Peninsular Malaysia is getting flooding rains. Flash floods are being reported. Canola was much lower last week and trends are down. Brazil is expected to dominate the oilseeds market for the next few months. Reports indicate that domestic demand has been strong due to favorable crush margins. Production was much improved this year on better weather during last Summer. It is dry in the southern and southwestern prairies now and this could mean reduced yields when the production season begins in a couple of months.
Overnight News:
Chart Analysis: Trends in Canola are down with no objectives. Support is at 734.00, 728.00, and 722.00 May, with resistance at 761.00, 767.00, and 777.00 May. Trends in Palm Oil are down with objectives of 3780 June. Support is at 3900, 3880, and 3850 June, with resistance at 4050, 4110, and 4170 June.

DJ Malaysia March 1-20 Palm Oil Exports 938,690 Tons, Up 30% on Month, AmSpec Says
Malaysia’s palm oil exports for March 1-20 are estimated to have risen 30% from the previous month to 938,690 metric tons, cargo surveyor AmSpec Agri Malaysia said Monday.
The following are the major items in the AmSpec estimate:
(All figures in metric tons)
March 1-20 Feb 1-20
RBD Palm Olein 262,985 194,490
RBD Palm Oil 62,385 75,945
RBD Palm Stearin 83,790 49,410
Crude Palm Oil 234,360 154,380
Total* 938,690 723,482
*Palm oil product volumes don’t add up to total as some products aren’t included.

Midwest Weather Forecast: Mostly dry conditions. Temperatures should average below normal.

US Gulf Cash Basis

Corn HRW SRW Soybeans Soybean Meal Soybean Oil
March
91 May
180 May
120 May
111 May

April
93 May
180 May
120 May
108 May

May
89 May
180 May 115 May
100 May

DJ ICE Canada Cash Grain Close – Mar 17
WINNIPEG — The following are the closing cash canola prices
from ICE Futures.
Source: ICE Futures
1 Canada NCC Best Bid
Price Basis Contract Change
CANOLA
*Par Region 755.80 0.00 May 2023 dn 1.80
Basis: Thunder Bay 781.60 30.00 May 2023 up 0.60
Basis: Vancouver 819.60 68.00 May 2023 up 3.60
All prices in Canadian dollars per metric tonne.
*Quote for previous day.
Source: MarketsFarm (news@marketsfarm.com, or 204-414-9084)

DJ Malaysian PM Cash Market Prices for Palm Oil – March 20
The following are prices for Malaysian palm oil in the cash market at 1000 GMT Monday, supplied by commodity broker Matthes & Porton Bhd.
Prices are quoted in U.S. dollars a metric ton, except for crude palm oil and palm kernel oil, which are in ringgit a ton. Palm kernel oil prices are in ringgit a pikul, a Malaysian measurement equivalent to 60 kilograms.
Refined, bleached and deodorized palm oil, FOB, Malaysian ports
Offer Change Bid Change Traded
Apr 945.00 -17.50 Unquoted – –
May 925.00 — Unquoted – –
Jun 915.00 — Unquoted – –
Jul/Aug/Sep 877.50 -27.50 Unquoted – –
RBD palm olein, FOB, Malaysian ports
Offer Change Bid Change Traded
Apr 955.00 -17.50 Unquoted – –
May 935.00 — Unquoted – –
Jun 925.00 — Unquoted – –
Jul/Aug/Sep 887.50 -27.50 Unquoted – –
RBD palm stearin, FOB, Malaysian ports
Offer Change Bid Change Traded
Apr 920.00 — Unquoted – –
Palm Fatty Acid Distillate, FOB Malaysian ports
Offer Change Bid Change Traded
Apr 720.00 — Unquoted – –
Crude palm oil, Delivered Basis, South Malaysia
Offer Change Bid Change Traded
Apr 4100.00 — Unquoted – –
Palm kernel oil, Delivered Basis, South Malaysia
Offer Change Bid Change Traded
Apr 244.00 — Unquoted – –
($1=MYR4.483)

DJ Escalating Demand for Soybean Oil Hits Possible Slowdown — WSJ
By Bob Henderson
Farmers and refiners are worried that a nascent boom in the market for soybean oil is being stalled by a challenge from an unexpected source: the Environmental Protection Agency.
Prices for soybean oil, a byproduct left over after crushing the beans for animal feed, soared to records last year owing to growing government incentives to make it into diesel fuel. Then, in December, the EPA proposed to mandate less use of biomass-based diesel through 2025 than many had expected, pruning the value of credits the agency issues to makers of biofuels. Soybean oil futures dropped more than 15% in the week after the announcement.
“The numbers came as a bit of a shock,” said Dave Walton, who farms about 750 acres of corn and soy with his wife and son in Wilton, Iowa. Mr. Walton, who manages his exposure to volatile vegetable prices by trading futures and options with an app on his phone, said he had hedged two-thirds of his crop, limiting his losses.
The price of soybean oil has roughly doubled over the past three years, largely because of demand to make fuel for trucks and trains. Futures are currently trading at about $4.23 a gallon, compared with about $2.68 a gallon for diesel.
That difference means companies have little economic motive to make diesel from soybean oil without government incentives, which are aimed at reducing carbon emissions. Those averaged more than $4.50 a gallon last year, according to S&P Global Commodity Insights, for a type called renewable diesel sold into California, which has a low-carbon fuel program that adds inducements to federal ones.
The number has climbed nearly 40% from 2019, driven by a tripling in the value of the credits the EPA issues to promote biomass-based diesel blending, to more than $2.50 a gallon for renewable diesel. Fuel makers who blend in excess of their quotas can sell their extra credits to others, who can submit them to the EPA to fulfill their obligation without blending.
Such sweeteners can make it more profitable for companies to produce green diesel than the conventional kind. The country’s largest maker of renewable diesel is Diamond Green Diesel, a joint venture between the oil refiner Valero Energy Corp. and the agricultural recycler Darling Ingredients. It made a gross profit of $1.45 a gallon making its signature product last year, whereas Valero made about $0.52 a gallon processing crude about $0.52 a gallon processing crude — in a banner year for oil refiners.
Biomass-based diesel production will likely exceed 3.7 billion gallons this year, according to the Energy Information Administration, up nearly 60% from three years ago. While waste products such as used cooking oil and animal tallow are also suitable raw materials, limited supplies are leading producers to rely increasingly on soybean oil, which furnished 47% of feedstocks last year, according to EIA data.
Crushing soybeans yields meal and oil, which make up about 80% and 20% of a bean’s weight, respectively. The protein-rich meal is mostly used in feed for hogs, chickens and other animals. The oil is used in foods such as salad dressing and, increasingly, fuel for semis. According to the Agriculture Department, about 44% of U.S. soybean- oil production will go toward biofuels this year, up from about 40% last year.
“For decades, oil was the residual product that companies had to figure out a way to get rid of after selling meal, the really valuable stuff,” said Scott Irwin, an agricultural economist at the University of Illinois Urbana-Champaign.
An old rule, said Mr. Irwin, was that oil made up about a third of a soybean’s value. But oil’s diesel-driven rally had that fraction flirting with 50%, at least until the EPA’s proposal.
Visions of soybean-powered truck fleets prompted the beginnings of a kind of green-oil boom in the Midwest, with bean-crushing plants in place of derricks and drills. Plans were made for 21 new or expanded facilities that would increase the country’s crushing capacity by more than 30%, according to Scott Gerlt, the American Soybean Association’s chief economist.
“Typically, we just don’t see that much growth in the sector,” said Mr. Gerlt. “It has been around a long time.”
The EPA news has put some of those projects on pause, said Mr. Gerlt. The agency’s proposal increases annual blending mandates for biomass-based diesel by less than one-tenth of the approximately 3 billion gallons of production increases that could come from refinery-retooling projects and new partnerships between energy and agricultural companies. That mismatch could cut the value of federal credit incentives, wreck those projects’ prospects and kick a leg of support out from under the soybean-oil market.
The EPA’s final decision is due in June. Trade groups are lobbying for higher mandates. Some analysts think many of the planned projects are destined for the dustbin. Others are more optimistic, largely because several other states, including New York, are working toward adopting low-carbon fuel-incentive programs such as California’s.
The soybean-processing industry could end up fine because of growing global demand for protein, said Corey Jorgenson, chief executive of Shell Rock Soy Processing, a crushing plant in Iowa that in January started operations boosted by funding from Phillips 66, which has dibs on the facility’s oil.
“If 80% of what you’re making is protein, the whole story can’t be only about renewable energy or the oil component of the soybean,” Mr. Jorgenson said.
Write to Bob Henderson at bob.henderson@wsj.com

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