Morning Comments December 9, 2021

Red Barn Behind Field

A bit of a role reversal yesterday as wheat and corn were weaker on the day, while soybeans rallied back after an early downturn, managing to close higher. 

From a fundamental development standpoint there wasn't much in the way of news yesterday. We got updated ethanol production figures for the week, showing folks getting back after it on the production side after the Thanksgiving holiday. At just over a million barrels of ethanol produced a day, production worked to a 5-week high. Stocks increased slightly as we saw some recovery in gasoline demand, though not enough to offset the large decrease seen the week prior.

We also were able to dig through the actual USDA census figures on October exports. Though most of the figures came in relatively close to where they should be, two things stood out a bit to most observers. 

First, we are starting to see China return to the DDGs market as an importer. The country imported nearly 3 million tonnes of distillers grain in 2017 before a punitive tariff made the imports of the ethanol byproduct too expensive. Rumor has it the tariff will be removed in January, opening the door to a significant increase in DDG imports. With shipments already starting to show up on the books it likely indicates the removal of the tariff is no longer a rumor.

Also, interesting to note, exports of DDGs to Vietnam have been record high so far this year, with Vietnamese exports of DDGs to China also a record. When there's a will, there's always a way. 

Secondly, in census figures, we saw wheat exports at an absolute record low. While many U.S. wheat traders will say it's the job of the U.S. wheat market to keep it relatively expensive from a global standpoint, folks are starting to wonder if perhaps we may be taking that assignment a bit too seriously. Afterall, seeing record low exports out of the U.S., no matter the intent behind it, doesn't really fit with the idea we are running out of wheat globally. 

In addition to the census figures we are seeing some additional developments out of China we will want to keep our eye on. Overnight the government released portions of their updated 5-year plan. While much of what was discussed in the plan remains in line with prior outlooks, it is interesting to see the Chinese government turn their attention to seed technology.

Calling it 'the chip' of agriculture, the country wants its ag tech companies to start focusing on maximizing production on even the 'poorest soils' in order to work harder to meet self-sufficiency goals set forth by the country. 

Looking ahead, we will get updated export sales figures this morning. We've been getting several announcements as of late of soybean sales to China or Unknown. With limited cash transactions happening day to day at least over the last week or so, many traders feel these announcements are just confirmation of old business. New or old, business is business and with the export window closing somewhat rapidly, we'll take whatever we can get.

We did see a massive sale to Mexico announced yesterday for both this year's corn as well as a decent chunk of next year's production. At just over 1.8 million tonnes, the sale announced yesterday was the 6th largest on record, impressive, even if market reaction was somewhat muted.

In addition to export sales, we will get an updated supply and demand outlook at noon Eastern. As we've discussed prior, most folks aren't expecting much in the way of excitement out of today's report. The USDA will leave production unchanged, focusing entirely on demand adjustments from a domestic standpoint, with global production updates expected to be somewhat minor. 

Current progress in production or shipments as well as margins really don't indicate the USDA has to make any major adjustments to corn or bean demand figures, though an uptick in corn used for ethanol could be warranted. 

Corn steady to 1 lower

Beans 5-7 lower