Morning Comments December 2, 2021

Grain Bins

We saw a bit more in the way of strength yesterday as buyers jumped back in after the recent rout we've seen in prices. 

Fundamentally we continue to trade a December market, in the sense that from a major fundamental standpoint there really isn't much going on.

From a bean demand perspective, we saw USDA October crush figures come in slightly higher than expected, at a new record for the month. In addition to strong crush demand fueled by incredibly high crush margins, we are continuing to see China in and buying heavy from both the U.S. and Brazil for Dec/Jan shipment.

With Brazilian production forecasts continuing to creep higher, exporters here in the U.S. are scrambling to execute as much business as possible before the much cheaper South American beans flood the global market.

This scramble to execute exports combined with strong crush margins has firmed spreads as of late and pushed basis higher. Many act surprised that cash would strengthen, with some saying it's potentially a long-term bullish indicator. However, anyone in the commercial side of the business will tell you, after a long, drug out harvest like many around the country just experienced, the last thing you're thinking about is turning around and loading out beans. 

The monetary incentive must be there to keep folks from waiting until after the New Year and that incentive on the commercial side has to come from shrinking carry and stronger basis values.

On the product side of soybeans, meal continues to show extreme volatility. After rallying over $60 from low to high, it fell nearly $30 before finding support and now working to fight its way back. Soy oil continues to struggle a bit as vegetable oil production is expected to grow in the coming year and oil yields per last night's crush report are a record high here in the U.S.

Over in corn we are seeing continued strength as folks remain vigilant regarding potential Chinese demand, as well as bullish future demand when it comes to corn used for ethanol.

China has been back in and buying large chunks of Ukrainian corn as of late, reportedly buying another string of cargoes earlier this week. While China needing corn will always keep the global market on high alert, especially after last year, one must wonder how covering their needs out of Ukraine is overly bullish U.S. export ideas. Though of course, soaking up Ukraine's exportable excess before moving to the U.S. is a real possibility.

Speaking of Chinese imports, there was talk yesterday that a large amount of Australian feed wheat was purchased for early spring shipment. With the big increase in available feed wheat from our friends Down Under, the hope for large-scale Chinese corn imports from the U.S. may start to fade, though it definitely will be something that underpins the market in the months to come.

On the ethanol side of things, production was off a touch last week in yesterday's report with stocks slightly higher. The USDA updated their October corn used for ethanol numbers yesterday after the close, showing near record high demand for the month. With ethanol margins at near record highs for this time of year the large amount of production should come as no surprise. 

Looking ahead, outside markets are working to recover this morning after they sold off hard late in the day yesterday with confirmation the Omicron variant was found in the U.S. We did see the Moderna CEO backtrack a touch yesterday as well saying we would be able to figure something out with the variant vaccine-wise relatively quickly. 

We will get updated export sales figures early this morning, with an announcement from Opec+ on what they will do with oil production increases going forward expected this morning as well. 

We also continue to monitor the situation between Russia and Ukraine as talk between the two countries continues to be terse, though we did pass the December 1st coup date the Ukrainian president spoke of this past weekend without issue.

Corn up 5-6

Beans up 5-6