Morning Comments April 11, 2022

Corn Crop Monday Alert

Friday's USDA report provided little in the way of surprises as the world continues to wrap its mind around how the war in Ukraine will impact grain production and what it will mean for the millions of people around the globe at risk of going without. 

To end the day, we saw July corn up 10, with December corn up 7. July soybeans were 41 higher, with November up 29. Wheat was up nearly 30 or more across each class. 

Looking at Friday's numbers, we saw corn carryout come in unchanged, versus a slight reduction expected. The USDA increased corn used for ethanol another 25 mbu based on recent production data and decreased feed usage by an equal amount, something that was not unexpected after looking at last week's stocks figures.

Globally, corn carryout came in a bit higher than expected on some reduced usage estimates and a slight increase in the Brazilian corn crop. The USDA reduced Ukrainian corn exports another 4.5 mmt, offsetting a good share of that reduction by a 3 mmt decrease in Chinese corn imports. Neither adjustment should be considered surprising, as we know Ukrainian corn exports are likely to be cut even further as the war continues and the USDA attache has said for several months that official USDA import projections are 6 mmt too high.

It is interesting to note that the USDA doesn't seem to anticipate China will replace its unshipped Ukrainian corn with U.S. corn. Many cash traders have been disappointed with this realization as of late, though with the current state of logistics it's possible we will be hard pressed to meet current targets as it stands. 

Over in soybeans, the USDA increased soybean export projections by 25 mbu and made a couple other minor adjustments to seed and residual usage. At 260 mbu, the USDA's ending stocks projection came in a couple million bushels lower than the average pre-report estimate.

Globally, carryout came in slightly higher than pre-report expectations, but not by much. Some were surprised by the 3 mmt cut in Chinese demand that worked to offset some of the further haircut given to Brazilian bean production estimates, though current crush and hog margins remain incredibly poor. 

Wheat ending stocks came in 25 mbu higher than last month and just over 20 mbu higher than pre-report expectations. The USDA cut both exports and feed demand figures, again, neither of which could be considered a surprise based on recent data we've seen.

Globally, wheat ending stocks came in a bit lower than expected as the USDA is running out of ways to shift the global balance sheet and have it make sense. It is interesting to note the USDA did reduce Ukrainian wheat exports 1 mmt, and increased Russian exports by the same amount.

Now that this report is out of the way, focus will shift to weather with the bulk of the U.S. locked in a much cooler and much wetter than normal pattern for at least the next two weeks. There have been brief planting windows opened for folks in the Delta and Midsouth, though they continue to battle extremely wet conditions. The driest areas of the Western Corn Belt and Southern Plains continue to struggle to find moisture, though a good portion of the Dakotas are expected to see near record amounts of snowfall in the next couple of days. 

Over in Ukraine, we are seeing folks return to cities that were part of the initial invasion to find massive destruction, though it is uplifting to see a Kyiv paper post a live glimpse of shops and other businesses opening to serve patrons in the heart of the city over the weekend.

Developments remain fleeting as it appears much of the aggression remains focused on the Eastern region with experts saying the May 9th deadline remains in place. 

Ukrainian grain analysts, farmers, and agribusiness people are working hard to pin down what production will look like for new crop. With an estimated additional 4 to 4.5 million hectares of land available to plant now that Russian forces have shifted their presence and the inability to ship using ports remains, the new concern has become where Ukrainian farmers will store bushels unable to be shipped this year on top of the new production.

China continues to struggle to maintain its Covid zero policy with reports of riots or social disruptions due to lack of food deliveries and supplies in locked down portions of Shanghai. Case levels reported for yesterday are over 27,000, hitting its highest level since the start of the pandemic. Other provinces are beginning to make moves to reduce chances of spread as well, with some cities taking their schooling virtual and having employees capable of doing so work from home. 

Looking ahead, we will get updated export inspections this morning at 11:00 a.m. Eastern. We need to see corn shipments remain around 56 million bushels or better for the rest of the export season to hit current USDA projections. Soybean shipments should continue to see a seasonal decline, though overall shipment pace is likely to remain stout. Wheat shipments are expected to be poor again due to an overall lack in sales. 

Markets continue to struggle with what is happening from a geopolitical standpoint as well as what's happening in the global economy. We will get updated CPI data this morning, with traders expecting an 8.4% year-over-year increase in consumer prices here in the U.S., another 40+ year record. The inflation story is far from over as commodity supplies remain incredibly tight and signs of demand destruction remain unclear at best.

Corn up 4 to 6

Beans down 8 to 10