Crude Oil declines on potential increased SPR releases.
Grain futures started steady overnight, but corn and soybeans went under selling pressure from a sharp drop in crude oil. The Biden administration announced it was contemplating the sale of 1 Mil barrels/day from the US strategic reserve to fight inflation. This proposal would allow for 180 Mil barrels of crude oil sold over several months to help re-balance the US market due to the Russian shortfall of supplies. As a result, crude oil declined as much as $7.00/barrel to just below 101.00 before stabilizing.
If the administration goes through with this, it does create a security risk for the US, as this draw down would drag the strategic reserves to near 500 Mil barrels, which would be less than one month of US crude oil supplies, leaving the country vulnerable to future supply shocks. The US consumes 20 Mil barrels of crude oil per day. This is a political band-aid for a much larger problem. You are deflating prices to help consumers not conserve while maintaining policies that did not increase domestic production. Political motivation is behind the announcement, as the releases would continue through October ahead of the 2022 mid-term elections.
There is also consideration from the administration to remove restrictions on higher blends of ethanol during the summer to lower the price of gasoline. As a result, E15 supplies could be more commonplace across the US, with the EPA considering the waiver as a fight against inflation.
The recent sharp decline in wheat prices has unleashed a lot of tenders, with Algeria booking 600,000 MTs of French wheat at a CIF price of $448/MT. Egypt is also back tendering along with Iran.
Russia announced it would ban sunflower seed exports and is imposing an export quota of 1.5 MMTs from April 1 to August 31.
The NASS March 1 Stocks/Seeding intentions report is out at 11:00 a.m. the day with high volatility anticipated at the release of the data.
It was a mostly lower trading cattle session yesterday with feeder cattle dealing with sharp price movements today in feed prices from the USDA crop report. Cash cattle started trading yesterday steadily with the prior weeks at $138. Cattle in the north moved from 138 to as high as 140 in some areas, which were two dollars higher. Choice cutout value yesterday rose $2.04 while select gained $2.62. The April/June cattle spread is historically tight due to the poor performance of the cash trade with optimism built into deferred markets.