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The continued stalemate over the Strait of Hormuz has deprived the world of over 500 million barrels of crude production since the Iran war started nearly two months ago and has led to predictions the toll will amount to over a billion barrels before the conflict is resolved (related item below). It’s a similar story on the fertilizer front.
More than half of the Middle East’s urea output may have been lost since the start of the Iran conflict, Bloomberg reported. The effective closure of the strait has left large volumes of urea stranded in the Gulf, tightening supplies for farmers around the world. Iranian drone attacks on Qatar and Bahrain have damaged energy and industrial infrastructure, curtailing production itself. As a result, CRU Group, a consulting firm, estimates that 55% to 69% of output has potentially been halted.
The report warned the situation could get worse.Producers have used vessels locked in the strait as storage, ready to move once the waterway reopens. But with peace talks stalled, loaded ships can’t exit and empty ones aren’t coming in. As storage fills up, more producers may be forced to shut down.
Planting progress: Weekly crop progress reports came out after the close Monday. Across key states, corn planting was a touch behind expectations, while soybeans were not far off the average estimate.
While wet weather had slowed activity in parts of the Midwest, the “I”-states — Illinois, Iowa and Indiana — saw rapid progress over the past week. Iowa went from just 2% of corn planted as of April 19 to 22% on April 26, in line with the five-year average. Illinois went from 13% to 29%, well ahead of the five-year average of 19%, while Indiana went from 14% to 30%, outpacing the five-year average of 10%.
Iowa soybean plantings were 11%, up from 1% a week earlier, still trailing the five-year average of 13% for this time of year. Illinois went from 20% on April 19 to 36% on Sunday, well ahead of the 18% average, while Indiana zipped to 35% complete from 19%, smoking the five-year average of 8%.
Here’s the breakdown across key producing states tracked by USDA:
- Corn planted was 25% as of April 26, compared with an average estimate of 29% produced by a Bloomberg survey of analysts. That’s up from 11% last week and ahead of the five-year average of 19%
- Soybean planting was 23% complete versus an average estimate of 22% and up from 12% a week ago; 12% is also the five-year average for this time of year.
- Spring wheat plantings were 19% complete versus an average estimate of 25% and up from 12%, while trailing the five-year average of 22%.
Wheat conditions: And then there’s winter wheat, where 30% of the crop was rated “good” or “excellent,” unchanged from last week. Analysts had expected a slip to 29%, reflecting drought conditions and possible freeze damage to the hard red winter wheat crop in the Plains.
- On the weighted Pro Farmer Crop Condition Index (0 to 500-point scale, with 500 being perfect), the HRW crop declined 6.35 points to 264.46, and continues to trend below the condition ratings for this time last year. The SRW crop remains in relatively better conditions but still declined 0.97 points to 359.67. Areas of Illinois, Ohio, and parts of the Southeast U.S. received rains over the weekend helped the rating remain near steady.
The $120 oil scenario: Goldman Sachs commodity analysts warned oil could trade at an average near $120 a barrel later this year. The Financial Times reported that the bank’s commodity analysts raised their forecasts Monday. In their base case, they predict that Brent crude will trade at an average of $90 a barrel in the fourth quarter of this year, up from an earlier projection of $80 if oil exports from the Middle East normalize by the end of June.
However, if production fails to return to normal levels until the end of July and if there is a “persistent reduction” of Gulf production capacity of 2.5mn barrels per day, then oil could average nearly $120 in the fourth quarter.
Brent and WTI crude remain off their late March highs, but have rallied more than 20% since April 17 when peace talks stalled and the U.S. began a blockade of Iranian ports.
SCOTUS grills Bayer over Roundup: The Wall Street Journal said Supreme Court justices across the ideological spectrum on Monday appeared receptive to arguments that Bayer can be sued for damages under a Missouri law requiring companies to warn consumers about risks from their products, even though the product wasn’t mislabeled under federal law because regulators had determined it was safe to use.
Bayer has maintained that Roundup is safe to use. The report noted that governments globally and the Environmental Protection Agency in the U.S. have repeatedly determined that glyphosate isn’t likely to be carcinogenic in humans and approved Roundup labels that didn’t include cancer warnings. The World Health Organization’s International Agency for Research on Cancer, however, classified glyphosate as “probably carcinogenic to humans” in 2015.
Ukraine warns Israel on grain shipment: Israel runs the risk of a diplomatic and legal response from Kyiv if it allows a vessel carrying grain from Russian-occupied Ukraine to dock at the port of Haifa, Reuters reported, citing remarks by an unnamed Ukrainian diplomatic source. Israel’s Haaretz newspaper reported earlier that the vessel Panormitis, which it said was carrying grain from occupied Ukrainian territory that Kyiv regards as stolen, was waiting for permission to berth in Haifa.
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