Morning Comments December 7, 2021

Soybean Field Sunshine

Markets started the day off lower yesterday before buying returned, allowing corn and wheat to finish a touch higher while beans were well off their lows.

Fundamentally speaking on the grain side, we did get updated export inspection figures yesterday morning showing soybeans continue to be the bulk of what we're putting through our ports for shipment. 

At just over 82 million bushels shipped on the week, soybean export shipments came in on the high end of the pre-report estimate. Corn and wheat, however, were not as aggressive, with corn shipments coming in at a four-week low. At just under 30 million bushels shipped on the week, corn continues to lag the pace needed by nearly half as we have to ship just under 55 million bushels a week to meet USDA expectations.

Wheat shipments continue to lag, though as we've discussed before, the job of the U.S. wheat market is to keep it expensive enough to stay out of the bulk of global export competition. 

In addition to export figures, traders started to discuss what they are expecting when it comes to Thursday's USDA supply and demand update. The December report tends to be a bit of a snoozefest in the sense that NASS will not update production figures until January, leaving us with adjustments from the World Ag Outlook Board that tend to focus on demand or global production.

With soybean export pace in line with historical averages so far, this year it is unlikely we will see much change there, though many bean bears like to point to much cheaper Brazilian beans February forward as a reason the USDA could make cuts. Crush figures remain in line with what's needed to meet USDA projections as well, likely keeping any demand adjustments for beans in Thursday's report minor.

Traders are expecting the USDA to increase corn used for ethanol as current pace indicates a small increase could be warranted. Though shipments are lagging, corn export sales remain strong from an historical perspective and with time on our side there, it is unlikely the USDA will make any adjustments on that side of things. Feed demand will remain somewhat unclear until we get an updated quarterly stocks figure in January, so from an overall standpoint a major adjustment to corn figures is not expected either.

One could argue high prices are doing their job when it comes to wheat exports, so an adjustment lower to wheat demand is possible, though carryout is expected to remain historically tight there as a whole.

Outside of supply and demand fundamentals we will continue to watch geo-political developments closely. As we discussed yesterday, President Biden will hold a video conference with President Putin today. Rumors began to circulate yesterday that Biden is working closely with other global leaders to put together a plan that would provide swift and harsh punishment to Russia if they were to become aggressors along the Ukrainian border. 

Talk of sanctions to Putin's inner circle as well as a removal from the SWIFT financial system were rampant yesterday as the Biden administration works with NATO and other global leaders to get a handle on the situation. A removal from the SWIFT system would be a major blow to Russia as it is what countries use to convert currency when exporting goods. A removal from the system would likely cost the country billions in lost global business, potentially further crippling the Russian economy that is already dealing with off the charts inflation.

In addition to what is taking place with Russia, the Biden administration announced a diplomatic boycott of the Winter Olympics being held in Beijing this February. The administration says the boycott is a reaction to human rights violations committed by the Chinese government. Athletes will still go and perform but will do so without the fanfare of U.S. leaders attending. 

China believes the boycott is an insult, continuing to maintain what they are doing with their citizens is not a violation of human rights, but for their own good. Overnight the Chinese Foreign Minister said the U.S. will "pay a price for its mistakes."

Looking ahead, we are watching oil recover a chunk of last week's losses as we continue to see indications that though Omicron appears to be much more contagious than its predecessors, it is also much milder. Case counts continue to spike, but most folks seem content with continuing on with their lives, so long as their government allows it. 

Markets likely to be mixed today as much of the focus will be on the Biden/Putin conversation and any developments there. 

Corn steady to 1 lower

Beans steady to 1 lower