Morning Comments February 15, 2022

Farnhamville 2016

It was a roller coaster kind of day yesterday as an increase in headlines regarding the Russia/Ukraine situation gave reason for both aggressive buying and selling. Corn and wheat finished their day on the high side, with March corn seeing a new highest close for the move. Though they started Sunday night higher, soybeans finished down on the day as it appears we should see more moisture return to Argentina. 

Developments in the Black Sea have the world's attention as the Biden administration and other European allies remain insistent Russia has intentions to invade this week. Early in the day yesterday stories of a desire to remain peaceful on both sides and a possibility Ukraine would drop its bid to join NATO had traders approaching the market from a risk off sort of standpoint. 

However, as the day continued the narrative seemed to shift with Ukrainian officials reiterating their desire to join NATO, saying they remain undeterred. Risk came back in to play in a major way just before the grains close when Ukrainian President Zelensky made a comment referencing an attack being imminent, saying he expected it to happen Wednesday.

Ukrainian officials were quick to walk the comments back within the hour, saying Zelensky was being ironic in his statement, actually being tongue in cheek regarding the West's claims of a Wednesday aggression. 

Overnight we got news that Russia is looking to move some of its troops out of where they currently are stationed along the Ukrainian border as soon as military exercises in the region are complete. Russian officials had already claimed troops would leave Belarus sometime late next week and are now expecting movement of troops stationed along the contested parts of the Ukrainian border to happen as early as this week.

It appears there is still major work to be done in the region, but Putin, Zelensky, and others seem to be willing to continue to work towards a diplomatic resolution.

In other news, we saw corn export inspections come in a touch better than the weekly amount needed for the first time this marketing year with just over 57 million bushels shipped last week. Of the 57 million, just over 16 million went to China, just about double the average seen these last few weeks and a good sign they will begin to work on whittling down the bushels the currently have on the books. 

Soybean inspections were solid on the week as well, and above the amount needed to meet USDA expectations, though down versus both last week and last year. Wheat shipments continue to lag.

Late in the day yesterday a study was posted in the Proceedings of the National Academy of Sciences claiming ethanol is 24% more carbon intensive than regular gasoline due to emissions increases resulting from land use changes, as well processing and combustion.

The Renewable Fuels Association was quick to call the study false, saying data was cherry picked and scientists used 'worst case scenarios,' pointing to a 2019 USDA study that said ethanol's carbon intensity was 39% lower than traditional gasoline due to carbon sequestration.

The group publishing the more recent study claims the USDA study did not take enough consideration regarding the loss of carbon sequestered during a shift in land use, contending it is behind much of the negative carbon intensity cited.

In any event, the Biden administration continues to make decisions regarding 2022 RFS blending requirements and beyond and will likely use a portion of both studies in its decision.

Looking ahead, we will continue to monitor developments with Russia as Putin plans to meet with his German counterpart early today. Putin reiterated his desire to help Germany with their energy needs overnight, most likely a nod towards his desire for an expedited final approval of the much-contested Nord Stream 2 pipeline.

We will also continue to monitor South American weather and crop size outlooks. Early yesterday we got two different Brazil soybean production estimates around 130 mmt, up slightly from what we had been hearing last week. 

As a good friend of mine pointed out in his commentary a week ago, a 125 mmt Brazilian crop confirmation as discussed last week would likely lead to an increase in U.S. old crop exports. A 130 mmt crop however would likely translate better into new crop demand, potentially leaving old crop exports unchanged and carryout at levels slightly above current industry estimates.

Corn down 8 to 8

Beans down 12 to 16