Morning Comments December 28, 2021

Corn Emergence 2

Old crop beans roared higher yesterday, gaining 30 cents on the day and moving to their highest level since mid-August. Corn traded higher as well, with March corn moving to highs not seen since the first of July, while wheat bucked the trend, trading lower on the day.

South American forecasts and money flow spurred much of the move in beans yesterday, with limited technical resistance helping to support buying. As expected, much of the driest areas in South America are hot and dry this week, with high temperatures in parts of Argentina soaring to over 100 degrees. 

While scattered showers are expected in some areas by the end of the week, the fact that we're seeing such heat and limited rainfall this early in the season has many folks imagining what we could see take place even further into production. 

There has been some discussion, however, that the pattern could shift after the 5th of January as La Nina continues to break down and atmospheric conditions potentially change just enough to let some measurable moisture fall in parts of Parana, Western Argentina, and Rio Grande do Sul. 

With much of the production season just getting underway in Argentina and Rio Grande do Sul, this shift in weather, if realized, could dramatically change the production outlook from one of doom to one similar to what we saw last year. In Parana it may be too late for those with September planted beans, as the damage has been done in certain locations, however there was talk yesterday that producers may have the option to tear up their first crop of beans to replant a second crop as there is still plenty of time in their growing season to do so.

Outside of South American weather, we got updated export inspection figures yesterday. Corn exports inspections were somewhat disappointing as the much-anticipated December surge in shipments hasn't necessarily materialized. At a 7-week low, we saw corn inspections come in around half of what is needed each week to meet USDA expectations, with just over 5 million bushels going to China. 

Soybean export inspections were on the high side of expectations but were still at a 12-week low as we see the traditional bean export window start to close. 

Wheat inspections were up respectably on the week, but still well below what we need to ship each week to meet already meager USDA projections.

We also got a surprise announcement of 269,240 metric tons of corn sold to unknown, or as one market watcher put it, "an oddly specific purchase figure made by a very unspecific buyer." Of course, as with any purchase made by unknown, market watchers assumed it was China and again got excited about the idea of big Chinese purchases coming down the pike. 

One could also assume, though, that this sale has been on the books of the cash side for a while yet, only to be announced when futures needed to be put on the lot at shipment. Either way a surprise corn sale as we work above $6 keeps those bullish on export potential happy.

Looking ahead, crude has quietly worked its way back to one-month highs, trading back up to levels not seen since the morning of our first introduction to Omicron. There are lots of mixed indicators there as well, with some less than enthusiastic economic figures starting to roll in and many folks looking at moving back to working from home or staying in that state throughout much of the winter. 

Anecdotally, airline ticket prices have fallen off substantially since the start of December, as it appears many folks are back to being reluctant to travel until a touch more is known.

Bottom-line for the week ahead, there are a lot of moving pieces when it comes to South American production, and while one must be cautious when it comes to getting overly bullish on ideas of significant production losses out of the region, cash is king and outside money flow will continue to dominate direction. While we've traded up to some solid resistance in soybeans and are incredibly overbought, it doesn't mean we won't trade higher, but at some point a correction is likely. Be aware of what current values mean for your bottom line and don't be afraid to take advantage of some of the big gains we've seen.

Corn 1 to 2 higher

Beans 6 to 7 higher