Higher Ag Trade As Energies Higher

MORNING AG OUTLOOK

Higher trade across the Ag Space this AM as the inflationary impact of higher energy costs continues to fuel higher prices.  Tensions in the Middle East remain high as the Straits of Hormuz remains mostly closed.  WTI May-26 crude is up $1.00 a barrel near $96.50.  New contracts highs overnight for spot RBOB and heating oil currently up $.08 and $.21 per gallon respectively.  As expected, the Fed Reserve held their Fed Funds target range at 3.5%-3.75%.  Chair Powell’s stated that while the oil shock stemming from the war with Iran would boost inflation in the short-term, “the implications of events in the Middle East for the US economy are uncertain.”  The US $$ is little changed in 2-sided trade while equity markets are moderately lower.  Export sales later this AM.  Argentina to remain in a wetter than normal pattern over the next week to 10 days.  Beneficial for late crop development, however, may present modest harvest delays.  Rains in Brazil continue to favor northern growing areas while better prospects for rain in RGDS towards the end of week 1 of the outlook.  Mid-South remains mostly dry.  Complete dryness across much of the US Midwest over the next week.  Drought conditions will continue to expand across the SW plains as temperatures warm to record levels this weekend.

Corn: 

May-26 is up $.04 at $4.67 ¼ with Dec-26 also $.04 higher near $4.94.  Look for May-26 to hold in a $4.40-$4.80 range with energy likely to drive any directional breakout.  Yesterday’s EIA report showed ethanol production slipped to 321 mil. gallons last week, down from 331 mil. the previous week and off 1% from YA.  Production was at the low end of expectations and slightly below the pace needed to reach the USDA corn usage forecast of 5.60 bil bu.  Export sales are expected to range from 25-70 mil. bu.  COF after tomorrow’s close is expected to show cattle at 99% of YA levels.

Soybeans: 

May-26 beans are up $.02 ¼ at $11.64 while Nov-26 is $.07 ½ higher at $11.49.  May-26  meal surged to its highest level since early Dec-25 currently up $5.00 at $327.00 while May-26 oil is down 20 points at 65.33.  Spot board crush margins have surged another $.12 ½ yesterday to $2.67 bu., the highest since Aug-23.  Bean oil PV slipped to 50.5%.  While US crush rates remain record high and support another 10-20 mil. bu. increase to the current USDA forecast of 2.575 bil. bu., exports are too high without additional Chinese purchases.  I suspect even higher energy prices and/or renewed buying from China, are needed for spot soybeans to trade back above $12.  If neither happens, look for prices to retest $11 this Spring.  With Trump’s trip to Beijing now postponed for about “five or six weeks” the Administration works to get new dates scheduled.  Export sales are expected to range between 14-28 mil. for beans, 150-300 tons of meal and (10) – 12k tons of oil.

Wheat: 

Prices range from $.02 to $.06 higher with MIAX the leader to the upside.  CGO May-26 is up $.05 at $6.09 while KC May-26 is up $.02 at $6.28.  Big temperature swings and growing drought in the SW plains is providing underlying support.  The recent price surge has left US wheat less competitive in the global marketplace, which should work to cap prices below their recent highs.  Export sales are expected to range between 12-20 mil bu.

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