Morning Comments December 27, 2021


The markets finished out their holiday-shortened week last week strong on continued concerns over dryness in Southern Brazil and the surrounding region. They picked up where they left off gapping higher on the night open and continuing to show strength at the time of this writing.

Rainfall was extremely limited last week in the driest areas with the trend expected to continue this week. Much of social media was aflutter full of pictures of the worst locations, some of which haven't seen rain in over two months. 

As one could expect the pictures look dire--though important to note many of the worst conditions are more isolated in nature than widespread. Travel of any kind of distance can take you from drought to good crop conditions according to some local experts in the area.

Talk of flooding in Northeastern portions of Brazil, as well as articles about continued rains in portions of Northern and Central Brazil delaying harvest, have helped to stoke the bullish bean flames as well--pushing January beans to their highest level since the end of August. 

Interesting to note old crop bean spreads have widened considerably in this move, something that doesn't necessarily scream a bullish market set up as domestic crushers here in the US have covered much of their nearby needs thanks to the rally in futures and the export market is basically dead. 

In addition to strength attributed to South American weather, some are attributing a portion of this runup to the well-forecast fund position rebalancing expected to take place the first part of January. One well-followed analyst has been talking about certain index funds needing to buy beans and products to rebalance their portfolio by the second week of the New Year. Some had scoffed at the report, while others are now saying a portion of this move was likely driven by that need. 

With many meteorologists starting to talk about moisture working its way back into Southern Brazil in early January, with a potential pattern shift coming we will likely know soon enough how much of this move was weather driven.

Outside of South American weather, we saw some developments in the Russian/Ukraine/NATO tensions over the long weekend. 

Putin held his annual year-end press conference, talking about developments in Russia and around the world for nearly 4 hours on Thursday. Throughout the presser he spoke often of wanting to avoid war with Ukraine and its allies, hoping to solve differences through means of diplomacy. 

Of course what Putin is referring to is a promise NATO will not allow Ukraine to join, something NATO and the Biden administration say is a non-starter.

In his conference Putin requested diplomatic talks between the US and Russia take place in the coming weeks in Geneva, something top advisors for the White House agree should and will take place. In addition to the move towards diplomatic resolution via talks, reports indicate upwards of 10,000 Russian troops will leave the Ukrainian border returning to their permanent deployment points. 

Looking ahead, we will get updated export inspection figures this morning at 11 eastern. We will be watching Chinese shipments closely as China has a large amount of unshipped purchases with over 10 mmt or nearly 400 million bushels left to ship. 

Interesting to note, though China has been in buying a plethora of global feed grains from just about everywhere and their domestic corn values remain high, only 48% of all imported corn offered from the government was purchased in December. 

Outside of export shipments, we will continue to watch Covid developments. Lots of talk that even the boosted or those who possibly had an earlier variant of Covid just a couple of months ago are finding themselves infected with Omicron. With reports over the weekend of China locking down cities full of millions of people as the virus is beginning to spread again one must wonder what happens from a global perspective as we move ahead into the winter months in the Northern Hemisphere.

Remember to take advantage of selling opportunities when they're presented. Scale selling and placing target orders is the best way to market in situations like this.

Our offices are closed today for the holiday.  The GROW Solutions Center is available for your grain needs while the markets are open. You can contact them at (515) 800-GROW (4769).

Corn up 6 to 7

Beans up 14 to 16