Glacier FarmMedia COVID-19 & the Farm

Experts

 

The Good, Bad & Ugly

The Good, Bad & Ugly

The Good: Spring wheat futures partially received from the beat down yesterday, with gains in the nearby March contract up by 9.5 cents per bushel. The main concern yesterday was the fact that the contract had moved down to the critical technical levels that lurk just below the US$10 per bushel level. The move today at least put some distance between those trading levels as the March contract closed the day at US$10.09 per bushel level. Traders are becoming more bearish on wheat prices as new crop export supplies are five months away. The problem is that new crop conditions across the northern hemisphere is far from ideal.

The Bad:  The good news is that wheat markets were buoyed by the results of the Egyptian tender that was awarded today. Ukrainian, Romanian and one cargo of French wheat won the tender with CIF values ranging between US$359.60 to US$363 per tonne. The total purchases were 300,000 tonnes with delivery in the last half of February or early March. Egyptian purchases this month were 900,000 tonnes, but they are still behind required purchases to tide them through to new crop harvest. Expect at least one more tender in January to complete purchases of old crop wheat. The bad news was that Russian wheat was offered at prices that ranged between US$347 to US$352 per tonne FOB. These were not competitive enough to be awarded the tender. These prices are down between US$3 and US$4 per tonne from the offers at the beginning of December.

The Ugly: Crude oil prices moved to their highest levels since the “Black Friday” implosion on the U.S. Thanksgiving weekend. Nearby February futures are trading above the US$76 per barrel level, which is a reminder that crude oil demand is recovering at a faster rate than production. The EIA report today indicated that not only stocks of crude oil declining, but gasoline and diesel stocks are also at five year lows. If you look at the commercial stocks of the big three (crude, gasoline and diesel fuel) are approaching five year lows at 765.1 million barrels. The complicating factor has been the release of the SPR into commercial stocks. When you look at the total (including SPR) U.S. stocks are 1.36 billion barrels, which is the lowest level in five years. Fuel costs are expected to remain high into the 2022-23 growing season due to tight petroleum supplies.