Morning Comments August 30, 2022

Cornboard Field 042221

Though they started the day sluggish, corn and wheat rallied big into the close, with December wheat up 37 and December corn up 18. Beans couldn’t manage to catch a bid, closing down 23 on the day.

Corn and wheat were stronger on concerns the grain export corridor in the Black Sea could be shut down just as it starts to hit its stride. Military experts were expecting a major Ukrainian counter-offensive to launch soon, though many seemed caught off guard when it kicked off yesterday. Ukrainian forces went after Russian troops in southern regions near Kherson, the first city Russia claimed after the invasion.

Russia and Ukraine so far have a different take on the activity in the region, with Ukraine claiming short term victory by taking back control of 4 villages near the city of 280,000. Moscow on the other hand said Ukrainian forces failed miserably and suffered heavy losses.

In addition to worries over the grain export corridor, traders have been closely monitoring the activity around the Zaporizhzhia nuclear plant. Russian forces took control of the plant in the early days of the invasion, with Ukrainian forces working to reclaim control ever since. 

Leaders from around the world have asked both Ukraine and Russia to demilitarize the areas in and around the plant to no avail so far, with reports of shelling hitting a fuel depot near the plant yesterday increasing concern a nuclear disaster could be imminent. Officials from the IAEA arrived in Ukraine yesterday and will tour the plant this week, planning to give a much-needed status update from the inside.

In addition to what is happening in Ukraine, traders continue to debate production potential ahead of this year’s fall harvest. Last week’s Pro Farmer crop tour gave the bulls everything they could have asked for with a yield estimate drastically below current trade sentiment. However, as mentioned before, several private analytical groups continue to contend their models show a below trendline crop, but nothing as dire as PF numbers last week.

Speaking of production potential, StatCan released their first new crop Canadian production outlook yesterday, with major crops seeing a sharp rebound in production from last year’s drought reduced totals. According to the group, Canada will produce its biggest canola crop in 3 years, with wheat production coming in above expectations and 55% higher than a year ago at 36.4 mmt. Corn production is expected to be up 6% year over year as well.

It seems to start earlier every year, but new crop production estimates for Brazil are starting to float around the industry, as farmers there are just a handful of weeks away from planting. Most estimates for the bean crop seem to be consolidating around the 150 mmt mark, some 25 mmt (918 million bushels) higher than last year’s crop. Corn production is expected to come in around 5 mmt (197 mbu) higher than last year as well. 

Here in the US export inspections were disappointing yet again for soybeans and corn, with wheat figures surprisingly decent. Corn and bean shipments came in below the number needed to meet USDA expectations, with today being the last day in the marketing year. We’ll get data for the last week of the marketing year next week, with limited excitement about what that will show as loadings seemingly remain slow.

Crop progress released after the close showed a slight reduction in the percent of corn rated good to excellent, down 1% to 54% versus last year’s 60% rating. Soybean conditions remained unchanged on the week, with spring wheat harvest rolling along.

Markets were much lower overnight, with energies off as well. Many outside market investors continue to digest Fed Chair Jerome Powell’s speech from last week, as the aggressive hawkish stance seen is somewhat new. Many folks have been focusing on the Fed pivot, thinking that as soon as the economy started to show signs of trouble the Fed would step in to bail it out. However, after last week, that doesn’t appear to be the case at all, with many now anticipating another 75 basis point hike next month and Powell making it clear a recession will not deter him.

Corn down 7 to 10

Beans down 22 to 28