Morning Comments November 19, 2021

Combine Grain Cart

Though December corn remains some 65 cents off its October lows, with soybeans over 80 cents higher one could say the market action of the last couple days has been disappointing at best, as yesterday we saw yet another failure to break out of the high side of the recent range.

The markets started the day higher across the board yesterday with reasonably decent export sales for all three major commodities reported in the 8:30 a.m. Eastern report. Soybean sales came in at two-week highs, thanks to the relatively decent Chinese buying interest we have seen as of late. Corn sales were down compared to the couple weeks prior, but still respectable at just over 900,000 tonnes. Wheat came in at two-week highs as well, though still not meeting the level needed yet to hit current USDA export projections.

Interesting to note, though Chinese buying interest has been solid recently we are still seeing them buying far more aggressively from Brazil further out into the season as the financial incentive to import from South America instead of the U.S. is far too great to ignore. 

Corn exports to Canada have been off the charts this year, after a tremendous drought wiped out much of their feed production in the Western Prairies. The industry was all aflutter this week as an elevator in North Dakota loaded a train a mile and a half long to send north. 

Speaking of rail, we are definitely hearing of some major issues when it comes to rail performance, especially in the west. As we mentioned yesterday there are some real concerns about logistics when it comes to moving ethanol to where it's needed, and the same could be said for getting grain moved. 

There have been lots of anecdotal reports as of late regarding huge basis moves in the Southern Plains. Many wanting to say the strength in cash in those regions is indicating a smaller crop than anticipated, when reality is many of those folks rely on heavy grain shipments via train early in the harvest season. The logistical snarl that has come from COVID only to be exacerbated by Hurricane Ida left many of the train schedules we've come to rely on in disarray. 

This issue is likely to only get worse if we were to see any further push when it comes to mandated vaccines.

We also got some updated insight from the EPA when it comes to compliance and the RFS. In what many see as a blow to the biofuels industry, the administration is giving folks a bit more in the way of time when it comes to showing they are meeting the requirements set forth. In addition to time, many feel that the Biden administration will end up relaxing some of those blending requirements, especially for 2020 as refineries can show significant reductions in gasoline demand and other industry hardships.

Looking ahead, we are seeing some real concerns develop when it comes to a resurgence in COVID around the world. Overnight, Austria announced a full national lockdown for at least 10 days starting Monday. Officials there are also indicating they will make it a legal requirement to be fully vaccinated for the virus come February 1st, 2022. 

Crude oil was down big overnight on the news, with grains also turning lower and the dollar yet again ripping higher. With the holidays around the corner and an increase in cases just about everywhere, there is real concern lockdowns could spread further in Europe, likely creating even greater supply chain issues while reducing oil demand. 

In addition to concerns over what is happening in Europe, there has been a lot of chatter the last couple days amongst industry insiders that a lot of the strength seen as of late should be attributed more to year-end money reallocation than anything.

To keep it simple, looking at open interest and other indicators it appears as though a large amount of new money has flowed into the market space since mid-October. Experts say many large funds and/or banks have certain percentage requirements when it comes to position exposure, for instance a certain percentage of investments are allocated to energies, with another chunk set to be traded in grains. 

According to those in the know, many of those percentage-based allocations had gotten out of whack, now attributing much of the recent move higher in grains and lower in energies to rebalancing before year end.

Today is the last day before the big holiday week; it's possible we could see many more folks move to the sidelines, especially as the situation in Europe continues to evolve.

Corn down 4 to 5

Beans down 6 to 7