AM Comments May 1 2024
Good morning. Happy May day. Ag markets are again mixed to start Wednesday's trading session, with soybean meal being the leader to the downside so far in overnight trade. Today looks to be another mostly macro day, as the wrap-up of the May FOMC meeting will like bring volatility to financial/currency markets. Corn futures are trading 1-2 cents lower, soybean futures are trading 3-4 cents lower, and the Chicago wheat market is unchanged. Products are mixed, soybean meal is down $4-5/ton, and soybean oil is up 10-20 points. Outside markets are mostly lower, crude oil futures are down $1.30-1.50/bbl, the Dow Jones index is down 75 points, and the US$ index is up 5 points.
Today's Reports: EIA Weekly Ethanol Production/Energy stocks; JOLTS Monthly Jobs Data
- Big news from yesterday afternoon included the Biden administration's announcement on tax subsidies for SAF, which was for the most part what many in the trade had expected.
- Corn used for SAF will qualify for the credits if it comes from fields that that use cover crops, use no-till, and use efficient fertilizer practices. Soybean oil will qualify if the soybeans used come from farms using no-till and cover crops.
- Interestingly, guidance given from the administration only goes through the end of this year (40B credit), with a new policy set to take effect early in 2025 (45Z credit). No guidance was given yesterday on the 45Z credit, which left some hopeful that farmers could employ one of the sustainable practices listed, as opposed to all of them as described currently.
- May deliveries for Wednesday included 3 corn contracts, 263 soybean contracts, 678 wheat contracts, 152 soybean meal contracts, and 1,322 soybean oil contracts.
- The port strike by oilseed workers in Argentina ended late Tuesday, as Congress passed President Milei's 'omnibus' reform package. Congress will now go through each issue that caused the bill to fail in February individually. Soybean meal futures gapped lower to start last night on this news.
- This morning's weekly ethanol production report is expected to show daily production in a range of 933-979k bbls, while stocks are seen between 24.7-25.7 mil bbls. Even at the high end, stocks look to be down from last week.
- In a weekly report, ANEC sees Brazil April soy exports reaching 13.62 mmt's, up from 13.48 mmt's last week. Meal exports are forecast at 2.16 mmt's, vs 2.44 last week. And corn exports are seen at 76,665 mt's, vs 81,728 last week.
- USDA's ag attaché in Australia forecasts 2024/25 wheat production at 25.8 mmt's, down from 26.0 mmt's in 2023/24. Exports are seen dropping by 3 mmt's to 17.5 mmt's.
- Focus in the financial markets Wednesday will be squarely centered on comments out of this afternoon's Fed meeting. It is almost assured rates will be unchanged, but economists will be looking for any signs of future policy direction out of Fed Chair Powell.
- Rainfall yesterday was seen across OK and E KS and also stretched North into W IA and S MN/WI. Radar shows additional moisture today in OK and NE, while the Eastern Corn Belt will be mostly dry.
- Models moved moisture further to the West overnight, but were otherwise unchanged for the next 10 days. Three/four storm systems will make their way West to East into the end of next week, while temps will be average to above average for most of the Midwest.
- Models continue to see a pattern shift to more normal precip in mid-May, but confidence beyond one week is low. US producers are beginning to chatter about prevent plant dates, which illustrates the moisture amounts in some areas.
- Forecast has added rains further South into Argentina in the next week, but is unchanged for Brazil. Heat/dryness is seen for another 10 days for most of Brazil's safrinha corn area. Cooler temps have also stretched slightly further North in the overnight forecast, raising the concern of frost.