Morning Comments April 21, 2022

Ready to plant Landus Cooperative

Any sell offs in the corn or soybean market this week seem to find buying as we started lower yesterday, only to finish much higher at the close. For the day we saw July soybeans up 25, with November up 9. July corn threatened a key reversal, only to recover and close 10 higher, while December corn was up 1. Chicago wheat struggled for much of the day, closing 11 lower. 

News continues to feel sparse as we settle into what feels like an indefinite offensive in Ukraine. Russian forces continue their barrage on targets in Eastern Ukraine, with Mariupol teetering but still standing, and Russia saying each day that today will be the day they take control. 

There have been discussions about continued peace talks, but we seem to have entered a stalemate with both sides accusing the other of failing to cooperate. Russia continues to threaten NATO as well, with the firing of an intercontinental missile yesterday, meant to make the West 'think', according to Putin. 

On the grain side of things, Ukrainian farmers continue their Spring seeding campaign in areas not directly impacted by the war, with many analysts worried more now about where they will put it all if export shipments aren't able to resume in earnest soon.

Overnight the Russian grain federation Twitter account accused members of the UN's Food and Agriculture Organization of withholding grain supplies to the world by not pushing for continued exports out of Russia despite sanctions. It is interesting to see the interaction as Russia continues to ship grain out of its ports at a pace relatively close to pre-war figures, with limited disruption to movement seen so far. 

We also got reports overnight that China's state-owned energy company is interested in taking on Shell's stake in a Russian oil business. Earlier this week one of China's top diplomats said China will work with Russia to continue to strengthen the economic ties between the two countries, despite U.S. threats.

In other Chinese news, we've seen some updates recently to the government outlook regarding pork production and hog margins. Hog producers in the country have been struggling with negative margins for several months now, prompting a reduction to herd size and adjustments to feed rations. 

While it is estimated hog producers are currently losing nearly $50 a head, the government predicts they will return to profitability by the third quarter of this year as a continued drop in herd size and a reduction in feed costs is expected to bolster pork values. 

It is interesting to note that though domestic corn values in China are nearing a repeat of their record highs set last January, buying interest for government-auctioned corn is nearly zero. According to Chinese analytical group Sitonia Consulting, volume offered and volume sold have been falling each month this year, with even domestic corn finding zero buying interest out of the lot offered. 

There have been reports as of late that high prices and limited ability to move supplies due to lockdowns is what is limiting buying interest, though the massive interest in auctioned wheat supplies seems to counter that idea.

Here in the U.S., we saw ethanol production fall off last week to its lowest level since September of last year. We saw a bit of a build in Midwest ethanol supplies but saw a large drawdown in the Gulf stocks thanks to increased export interest. 

Weather-wise, we are continuing to monitor dryness in the Central growing regions of Brazil, with an estimated 25-30% of the Safrinha corn crop at risk. So far production estimates have remained unchanged, with some analysts in the country increasing their outlook. Cash markets indicate limited concern regarding supplies with Brazilian corn exports continuing to roll on at a decent pace and prices remaining competitive on a global scale.

Here in the U.S., below normal temperatures are expected to return after a brief warm up, though drier conditions are expected after another system works through the country this weekend.

Looking ahead, we will get updated export sales figures this morning at 8:30 a.m. Eastern. Traders are expecting relatively large sales figures for both corn and beans. 

Corn 3 to 4 lower

Beans steady to 2 lower