Morning Comments April 12, 2022

Grain bins dryer

Corn tried to follow wheat higher yesterday only to find itself drug lower by soybeans. When the closing bell rang we saw wheat up over 30 cents again, while July corn was down 2. July soybeans lost 27 cents on the day, while November beans were down 9.

Concerns over how continued Covid lockdowns in China would start to impact demand hit the soybean, energies, and other commodity markets hard yesterday. Poor government reserve auction interest and an overall slowdown in crush has limited domestic bean buying interest, catching some off guard. Rumors of China cancelling previously purchased beans piled on as well, though there is no indication in the cash market a major cancellation took place.

There is some confusion regarding the current status of lockdowns in Shanghai, as some feel optimistic the government will work towards reopening sooner rather than later. There have been some signs of progress as grocery stores and some chain restaurants are reopening for takeout. 

A major shortage of delivery drivers and a shutdown of local restaurants left many residents of the city scrambling to cover their food needs these last several weeks, as many are so accustomed to buying fresh food supplies as they are needed, with limited shelf stable supplies on hand. Unrest had been reported over the weekend, prompting officials to relax some of their rules and restrictions, though social interaction is asked to remain at a minimum and citizens are required to have a negative Covid test to leave their homes. 

Officials are also working to stabilize logistics in the country as limited interprovincial traffic has created delays in movement resulting in shortages of supplies elsewhere in the country. Lack of truck availability in Shanghai has pushed the number of boats waiting to offload up to nearly 500 this week, with further logistical snarls anticipated, even if the city were to fully reopen tomorrow. 

Export inspections didn't show much in the way of concern when it comes to being able to unload ships, as China was in for the lion's share of 28 million bushels worth of soybean shipments and the 18.6 million bushels of corn they seem to have grown accustomed to taking each week.

In addition to decent export shipment pace, China was in again buying another million metric ton of corn, with nearly 26 million bushels of that set for shipment in the old crop time period. While some in the industry say this is relatively routine business, nothing is routine in this current market structure, with traders waiting to see if more purchases are announced in the coming days. 

Egypt announced its first tender for wheat for the first time in nearly 6 weeks, saying they are looking at European suppliers in this round. It is interesting to note that delegates from India's ag industry are working diligently with the Egyptian government in the hopes Egypt will approve imports of Indian wheat.

India is currently harvesting its wheat crop, which is expected to be another record at 111 mmt. The Indian government has said after the 25 mmt of wheat required to fill government stockpiles for the poor is allotted, the rest is open to the export market. This a very different tone than we saw just two years ago when the idea of Indian wheat exports was almost non-existent.

Many have already forgotten the Indian farmer uprising that took place from late 2020 into 2021, but it appears the farmers may have gotten their point across, as officials say they are excited for Indian farmers to now reap the benefit of high global prices and a supply surplus.

Speaking of wheat, here in the U.S. crop conditions improved slightly to 32% good-to-excellent. This now making it the second worst rated crop for this week in history as the wheat crop was rated at 30% good-to-excellent at this point in 2018.

Looking ahead, the Biden administration is expected to announce plans to allow summer e15 sales while touring an ethanol plant today in Menlo, Iowa. As you may recall, a federal appeals court judge threw out the Trump era EPA rule allowing year-round sales, saying the group overstepped its bounds. It's unclear how the Biden administration will avoid a similar pitfall, though they say they are using a different approach than Trump had prior.

We will also get updated CPI data this morning. Traders are expecting year-over-year inflation rates to come in over 8.2%.

Markets are strong out the gate so far with continued breakdowns of peace talks between Russia and Ukraine, optimism regarding China relaxing Covid restrictions, and the idea that the inflation trade has not yet run its course adding to the strength.

Corn 6 to 8 higher

Beans 15 to 17 higher