OPEC+ cuts oil production on May 1.
Grain prices opened higher and advanced on positive technical considerations from Friday’s closes and the addition of OPEC announcing it was slashing production by 1.6 Mil barrels/day starting May 1 and running through 2023. Bullish sentiment continues due to the cut in stocks that were more than expected and for the indication that farmers planned on increasing acreage by 6 Mil acres over last year, with a large percentage of those gains tied to ND/SD and MN, who were struggling with another 7-20 inches of snow this week before a swift warm up after Easter. Potential Prevent Plant acres will likely come into play from the March intentions total.
OPEC surprised the world with an announcement late Sunday on slashing oil production on May 1, this is occurring as China’s economy starts to recover. The Biden administration obviously said that cuts are ill-advised and will raise tensions between Washington and Riyadh. The Biden administration had pledged they would start refilling the SPR in early 2024, as it is at its lowest level since the 1980s at 380 Mil barrels which is just 8.6 days of use. This will be very difficult to do, especially in an election year. Look for the Biden administration to avoid refilling. Bio-fuels will find increased needs for ethanol, biodiesel, and renewable diesel.
The Argentine government has announced their soy/dollar rate this morning, and speculation is growing that the conversion rate will be 270-300 pesos/MT versus Friday’s close, which was 209 pesos. The 20% plus premium is priced in hopes that Argentine farmers will part with newly harvested soybeans for crushers. The problem is that inflation is running at 99% and farmers remain tight holders of beans as the blue market for the peso is trading above 410.
ADM has joined Cargill and Viterra then exiting the Russian grain trade. This is concerning for Russian farmers as sustainable future growth for sunflowers, wheat and corn will be difficult under Russian ownership.
Warmer weather for the Midwest is on the way after Easter for planting in the Midwest. In the meantime, the US/EU weather models have heavy snow hitting the Northern Plains. Anywhere from 4-18” of snow are forecasted before drying trend with near to above normal temperatures arrive after Easter. Unfortunately for the Central Plains there is no chance of any moisture in the 10-day forecast. The GFS models have a trough forming over the Intermountain West in the 11-15 day period which could promote some Plains showers/storms.
Last week was historic in many ways for live cattle along with the explosive rally as cash jumped substantially from the prior week. Box beef values were higher by over $2.00 but estimated slaughter margins plunged by $43 as the cattle prices outpaced beef. Estimated margins are still positive at $97/head. December 2023 and all of the 2024 cattle contracts closed above $170 with each of those contracts setting all-time highs for their months. There is no indication of a top with estimated slaughter margins still profitable. As prices are elevating, cattle options or LRP (Livestock Risk Protection) insurance is a good way to protect for the unforeseen. Heartland Investor Services at 800-359-0221 offers both.