Morning Comments December 20, 2021

Cornboard Field 042221

Though the day-to-day moves were far more pronounced, for the week last week, corn finished 3 higher, beans were up 14 and wheat was down 10.

Dryness in Southern Brazil was the story of the day to finish out the week for corn and soybeans, while wheat caught a nice bid Friday on talk the Russian wheat export quota will be a touch smaller than what traders were anticipating.

Forecasts continue to remain relatively dry for much of the driest portions of Southern Brazil, though spotty showers are in the 7-day forecast. Traders continue to struggle with just how much of the crop is in trouble. At this point many would say the area in trouble is less than a third of the growing area, with many pointing to first crop corn production as the biggest concern. 

Interesting to note, current analyst estimates are that Rio Grande do Sul could see a 10-20% reduction in first crop corn production, with some areas being zeroed out entirely. While on the flip side, though dry, Parana's corn is still rated 90% good, with only 1% rated poor as of last week.

In addition to questions regarding just how much of the overall crop is at risk, one much ask just how much the nearly ideal conditions in the northern two thirds of the country may add.

Seasonally, we tend to add a bit of a risk premium to the markets on South American weather, so this pop ahead of the holidays doesn't necessarily come as a surprise and is not likely to overstay its welcome.

Speaking of corn production, folks are starting to increase their Ukrainian crop estimates even further as the country is nearing its initial corn production estimate with nearly 10% of the crop left to harvest. Over the weekend, some Black Sea analysts increased their Ukrainian corn estimate to 43 mmt, up nearly another 2.5 mmt (98 mbu) from the most recent USDA estimate.

As long as their ports remain unencumbered by any sort of Russian powerplay, most of that increase is likely to be added to their export target. 

Looking ahead, we are starting to see some major risk off moves as Omicron continues to spread throughout the U.S. and the world. 

Here in the U.S., we are seeing many groups with return to work plans deciding to continue to work from home for the foreseeable future, with other companies who had initially returned switching back to work from home mode through the holidays and potentially beyond.

Daily case numbers hit a record high in New York over the weekend, though the state has one of the highest vaccination rates in the country. So, while Omicron continues to appear far more mild than earlier variants, many fear the inability of the vaccine or previous infections to stop new infections could cause major issues when it comes to quarantining and medical care.

On the grain side of things, we will get updated export inspections this morning at 11:00 a.m. Eastern. There has been a lot of talk the last few weeks that this will be the week we see Chinese corn import shipments pick up in a big way, so most traders will be looking to see if that is the case.

Of course, with it being a holiday week, volume will likely be light, potentially opening us up to some major volatility. My biggest concern would be seeing any sort of risk off trade on Covid fears exacerbated by the current fund length and thinner trade. Questions as to whether that trumps Chinese demand potential and South American dryness will likely change day to day.

Corn down 3 to 4

Beans down 3 to 4