Morning Comments August 22, 2022

Farnhamville 2016

Corn, wheat, and beans all had decent trading days Friday, with wheat bouncing back 22 cents, corn up 7 and beans only down 1. For the week we saw wheat and beans lose 50 cents, while December corn was down 19.

Concerns over what is taking place around Ukraine’s Zaporizhzhia nuclear plant helped support wheat and corn Friday as traders add back in some of the war risk premium that has seemingly been removed from the market these last few weeks. Over the weekend developments around the plant seemed limited, though calls for a demilitarization of the surrounding area have grown louder and accusations from both sides have grown more heated. 

Ahead of the weekend, Ukrainian officials warned of a potential ‘false flag’ event, or an escalation that would take place in or around the plant done by Russians but blamed on Ukrainian action. UN officials and other western leaders are calling for International Atomic Energy Agency (IAEA) representatives to visit the plant and ensure that all is well and that operations are normal. 

Exports out of the region continue to pick up pace with officials from the Ukrainian Agrarian Council putting their August export estimate at 4 mmt, the best pace since the invasion and only down around 1 mmt from their average monthly pace prior to the war. Wheat crop estimates continue to grow as harvest wraps up, with overall production looking like it will come in only slightly below pre-war estimates.

However, with such a large amount of Ukrainian wheat production area in the invasion zone, an estimated 5.5 mmt of wheat that would have been Ukrainian production will likely be destroyed or claimed by the Russians. Analysts in the area point to a huge increase in estimated Crimean production as a sign this is taking place as the current crop production estimate seems impossibly high to those with ties to the region.

In other news, China continues to struggle with Covid, an ailing economy, and record heat and dryness in some regions. Over the weekend local officials extended some of the energy limitations put in place last week as temperatures and energy demand soar. As it currently stands the areas most impacted by the worst conditions are major producers of rice, lithium batteries, and other important industrial goods.

Officials are working to seed clouds in the hopes of triggering rainfall, though it appears attempts so far have proven unsuccessful.

Covid cases have fallen off slightly as lockdowns in regions most impacted by the virus have slowed the spread. Officials continue to struggle with how to find a new normal as it seems any return to typical behaviors leads to case spikes.

Overnight the country’s central bank cut borrowing rates once again, down another 15 basis points from last week’s reduced rate. In addition to rate cuts officials are also looking at offering special loans and guaranteeing bonds in hopes they’ll be able to establish support under the nation’s crumbling real estate market.

Looking ahead, we will get updated export inspection data this morning at 11 eastern. Traders are expecting another decent week for soybean shipments and remain hopeful we will see an uptick in corn shipped ahead of the end of the marketing year.

We will get updated crop progress figures after the close as well, but most traders will be closely monitoring this week’s Pro Farmer Crop Tour. This week’s tour is always the most watched of the year as it provides us with the largest group of crop scouts traveling the bulk of the Corn Belt giving insight into production potential. The Eastern group will kick off today in Ohio, heading to Indiana, while the Western group will start in South Dakota, heading south into Nebraska.

Corn steady to 1 higher

Beans 5 to 7 higher