Morning Comments February 17, 2022

Grain Bins

As has been customary these last several weeks, beans not only covered their losses from Tuesday, they surged beyond that, back up to recent contract highs. Corn followed, recouping half of Tuesday's losses, while wheat continues to struggle with direction.

Reports of major quality concerns and potential yield reductions due to too much rain in parts of Mato Grosso circulated the industry yesterday, accompanied with pictures of damaged beans. While we seem to hear a similar story nearly every year as harvest tends to be wet in Brazil, with this year's losses in the south what is happening in the north becomes that much more important.

In addition to quality concerns in the north, members of the Paraguay crushing industry cautioned that the country's harvest is down 60% from last year, raising concern that they will run out of beans by June. With all the attention placed on crop size in Brazil, and many new observers in the market space, the realization that crops in Paraguay and Uruguay were damaged significantly may come as new information to some, potentially further stoking buying interest. 

Argentina could potentially step in to help supply their neighbors to the north but may struggle to do so as they too are battling drought in certain regions. Stories of wildfires in northern portions of Argentina burning several hundred thousand acres is only doing more to bolster concerns of a major production reduction there as well, though forecasts do look to try to bring rain back into the area the last week or so of the month.

Cash values throughout South America both for beans and products to be exported remain stout as well, potentially indicating some solid export potential for soy oil out of the U.S. as we work into spring.

Interesting to note, most major markets are seemingly bored with Russia/Ukraine conflict commentary. Though Putin insists troops will begin to, if they have not already, return to their permanent stations, the U.S. and its allies with NATO say signs actually indicate Russia is increasing troop presence. 

Overnight there were several reports of shelling taking place in the contested region, with pictures of a school in the area hit circulating social media. In addition to those reports, talk that Russia is again moving in medical tents and supplies continues to raise concern.

Over the last month or so it seems a report of similar magnitude would have crude, wheat and corn up big, with stocks down, however at the time of this writing major moves are minimal.

Energy figures released yesterday morning showed a bounce back in ethanol production figures from last week, with a bump up in stocks. Though the bump in stocks is not necessarily what we would like to see when we are already at near record high levels, the fact that much of the increase was in the east indicates logistics may be improving. 

Interesting to note on the crude side of things, yesterday's energy report showed crude supplies at the Cushing, Oklahoma hub at their lowest level in over 3 years. Crude supplies as a whole came in a bit higher than expectations though, showing just over a million barrel gain in supplies versus the million barrel plus draw that was expected.

Looking ahead, we will get updated export sales this morning at 8:30 a.m. Eastern. Traders are expecting another big week for bean sales, with reasonably solid expectations for corn as well. 

In addition to watching export demand, we will continue to monitor South American weather as well as what is happening from a cash standpoint across the board there. We know a significant portion of anticipated world supply has been removed from the global balance sheet, what that means for global demand now becomes the question.

Corn steady to 1 lower

Bean up 10 to 12

Trade Schedule for Presidents Day

Friday, February 18: Normal trading session

Sunday, February 20: No evening trading session

Presidents Day, Monday, February 21: No day trading. Trading for grains resumes at 7 p.m.

Tuesday, February 22: Grains trade normal hours. Livestock resumes trading at 8:30 a.m.