Morning Comments April 29, 2022

Red Barn Behind Field

The corn market got the confirmation of Wednesday's Chinese purchase rumors it was looking for but reacted much the same as it did the last go around, spiking after the morning open only to fall off by late morning. On the day we saw corn close up 1, with wheat down 5 and July beans down 3.

As mentioned, Chinese purchases were confirmed with a USDA flash sale announcement yesterday morning. While the number came in smaller than what had been rumored at just over 1 mmt, it was still one of the largest chunks purchased in the recent spate of buying we've seen.

Over the last month we have seen China buy just over 100 million bushels of old crop corn, while also locking down just under 78 million bushels of new crop. Again, as we had discussed yesterday, this most recent purchase is extra interesting as values combined with shifts in currency would mean importers are buying at a loss to cover needs.

However, some claim these purchases were optional origin intended to have been shipped out of Ukraine. Not being able to lift the purchases from their original origin has pushed Chinese buyers to shift their demand back to the U.S. If this were the case, losses on the switch would be far less than if buyers were in the spot market.

China has been an aggressive buyer of new crop beans as well so far this year, with both new crop corn and beans seeing an unusually large sales pace for this early in the marketing year, most of which are set to go to China. 

Of course, the increase in purchases could be for a couple of reasons in addition to overall projected need. With global currencies continuing to move erratically and uncertainty regarding new crop production potential, China is doing their best to secure some supplies before they get more expensive if something were to happen from an economic or production standpoint.

Speaking of bean exports, with yesterday's updated export sales figures from the USDA we are now ahead of projected overall sales for the year by about 1 million bushels. While there is some talk we could see cargoes from the U.S. swapped out for Brazilian origin if Brazilian values continue to fall off, the fact is the USDA will have to contend with sales already outpacing their estimates with just under half a marketing year remaining when they update supply and demand figures in May.

In other news, we continue to watch what is happening in the Black Sea as Ukrainian soldiers are managing to hold their own along a 300 mile stretch of border in Ukraine's far eastern regions. There has been talk of the war expanding and with an explosion reported yesterday in Kyiv, there is worry Russia could yet again shift its attention to other regions in the country. We are currently 10 days away from what has been rumored to be Russia's target end date with little in the way of major progress able to be reported. 

China continues to struggle with Covid, moving restrict movements and social gatherings even further in Beijing. A bright spot, however, is that the government has declared Spring planting not be interrupted, pushing farmers to roll in one of their largest ag producing provinces. 

The U.S. economy shrunk by 1.4% in the first quarter of 2022, down significantly from what was a tremendous quarter of growth to finish out 2021, and below the pre-report estimate of 1% growth. While many analysts say a smaller GDP figure for the second quarter, and the textbook definition of a recession, are unlikely, others point to freight demand dropping and falling consumer confidence as an indication things could actually show up as worse when we get Q2 figures in July.

Looking ahead, another round of precipitation is moving through the Western Corn Belt with some of the driest areas in Nebraska, Kansas, Oklahoma and Texas seeing rains or expecting rains. Forecasters continue to point out that an active weather pattern in May will likely help recharge soil moisture in some of the driest areas but will keep planting windows small. A much hoped for warm up seems likely around May 10th.

Markets are a bit stronger this morning to kick off our Friday. Lately the trend has been for some traders to look to the exits on Friday, however with weather less than desirable and China possibly still looking to buy we could remain decently supported.

Corn steady to 2 lower

Beans 5 to 8 higher