Morning Comment November 23, 2021

Grain Bins

The wheat market started and finished the day much higher yesterday, dragging corn and soybeans with it. 

Wheat was stronger for all of the reasons we discussed in detail yesterday morning as we continued to see conversations about crop damage and uncertainty over final production coming out of Australia. Cash traders in the country are covering their own risk of the unknown by increasing prices on the wheat they would offer into the market structure as well. 

While it is not unusual to see offers increase substantially when a seller is uncertain of what they have to sell, a 30/tonne increase over the weekend alone definitely caught the global cash market by surprise.

In addition to the Aussie wheat story, another piece ran yesterday describing the Russian military buildup along the Ukrainian border as 'concerning', saying an invasion could be imminent. With Ukraine being one of the few countries in the world with an exportable surplus of high-quality wheat, the idea it could be dealing with a war and the potential disruptions to everyday life, business and exports is something that needs to be monitored closely.

Speaking of Ukraine, the ag ministry there bumped their corn crop production estimate up yesterday to 40 million metric tonnes. This increase puts the crop 2 mmt higher than the current USDA estimate and 10 million metric tonnes (390 million bushels) higher than a year ago. So, while folks can focus entirely on wheat being the commodity disrupted by war, we must remain cognizant of the potential impact a Russian invasion of Ukraine could have on corn exports, most of which at this point are destined for China.

On the export side of things, soybean exports inspections remained strong yesterday, while corn and wheat exports continue to be relatively sluggish. Corn export inspections did show just over 8 million bushels heading to China on the week, one of the largest shipments we have seen heading in that direction in a handful of months it seems. 

Outside of purely fundamental developments, we had our share of macroeconomic stories released throughout the day as well.

Though it was expected, the market seemed to catch fire after President Biden tapped Jerome Powell to remain on as the Federal Reserve Chair for a second term. Many feel Powell is a bit more free when it comes to monetary policy, potentially indicating more in the way of stimulus or reserve spending would be seen if we were to run into another economic downturn. 

The dollar was higher on the news, but so were concerns that we will find inflation to be far from transitory if we aren't careful.

In addition to Fed news, we saw German Chancellor Merkel say Germany needs to do more to combat the spread of COVID. Germany is the largest European economy, so the idea another lockdown could be coming is giving even some of the most bullish economists pause.

Looking ahead, we will see more folks working their way to the sidelines as the holiday weekend for some will start tomorrow. News-wise, not much is expected though we will definitely want to keep our eye on any developments when it comes to Russia/Ukraine or potential COVID lockdowns.

Corn down 2-3

Beans down 4-5