Markets were down hard yesterday as traders took on a bit more in the way of a risk off approach with reduced tensions in the Black Sea, wetter forecasts in South America, as well as some interesting developments in potential Chinese demand.
Though the White House contends they have seen no recognizable shift in troop placement or quantity, Russia has made sure to share images of troops and equipment leaving the areas in which they had temporarily amassed. Troops that had been in Belarus since mid-January are gathering equipment and look to be preparing for departure as well.
Putin continues to contend there was never a plan to attack in the first place, while the White House and its allies say the risk of an attack remains and that the reason for the drawdown was the West's announcement of his plans and threat of sanctions.
In any event, it appears the threat remains, though it may become less of a major market concern in the coming days and weeks.
We received confirmation yesterday that the rumors making their way around the marketplace last week regarding Chinese cancellations of Brazilian soybean cargos were true, with at least 5 boats bought for shipment cancelled.
At face value you could say this would be a bullish move for the market as the Chinese will have to satisfy short-term demand by purchasing U.S. beans, as was the narrative for much of last week.
However, the fact these cancellations appear to coincide with a release of up to 5 mmt of government reserves into the market and a purchasing of new crop bushels from the U.S. indicates that Chinese demand may be a bit more tepid than we have seen recently as poor hog margins and weak crush margins continue to limit the desire to see aggressive ownership.
We will continue to watch Brazilian export line ups and values offered, as they remain cheaper than U.S. values March forward and harvest continues to progress.
Yesterday we got some updated crop outlooks from a couple different groups, continuing to indicate the sweet spot for final production should come in somewhere between 124 and 134 million metric tonnes. With the range of final production estimates running about 367 million bushels apart from top to bottom, cash values and exportable supply will likely be the best way to get a true feel for production in the weeks and months ahead.
Down in Argentina we will see a bit of haves and have nots when it comes to short-term moisture, leading some to worry about moisture stress starting to arise as temperatures warm into the 90s. While Argentina bean production matters on the global stage, mostly from a meal standpoint, what happens weather-wise in the next handful of weeks will have a major impact on corn production potential.
From a domestic standpoint, we got updated crush figures from the National Oilseed Processors Association (NOPA) yesterday, showing association members crushed 182.2 million bushels in January. While crush remains stout, and is in line with current USDA production outlooks, the figures came in a touch lower than traders were expecting as we saw some slowdowns in Western Corn Belt plants.
Looking ahead, we will get updated energy information released later this morning. We will continue to monitor ethanol stocks to see if there are any signs of logistical and market improvement. The hefty supply of ethanol stocks has prompted plants to slow production as of late also working to limit grind margins and weakening basis in many regions.
Markets were a touch stronger overnight as we saw some interesting Chinese economic data and continue to see signs of inflation in the U.S. running even hotter than some had anticipated.
Corn up 4 to 6
Beans up 15 to 19