Morning Comments February 18, 2022

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Wheat seemed to be one of the few markets trading Russian/Ukraine headlines yesterday, trading relatively strongly throughout the day and closing nearly 20 higher. Corn and beans struggled a bit after starting much higher, as wetter South American forecasts and hawkish Fed President chatter spooked the markets midday. Buying came in towards the end of the day however, allowing both to finish moderately higher.

As we discussed a bit yesterday morning, the markets appear almost bored with the nearly constant inundation of headlines regarding what is happening in Eastern Ukraine. While it appears shelling activity in the region picked up midweek, hitting its most active pace since 2015, many in the area continue to contend not much has changed. 

The area in which the shelling is taking place has been hotly contested since 2014, with Russian backed, but still Ukrainian citizen separatists fighting the Ukrainian military. Ukrainian officials made it clear members of their military were not to respond to any of these aggressions to avoid any potential flare up in the conflict. 

The Biden administration contends Russia is taking part in a "false flag operation," possibly hinting that the increase in aggression from the separatists in the area is far more than just a coincidence. Today we will see diplomatic efforts continue as President Biden hosts a call with several world leaders.

In other news, we continue to monitor what is happening when it comes to South American production potential and Chinese demand. Forecasts do appear to bring more rainfall into the driest parts of Southern Brazil, Northern Argentina, and surrounding countries. Condition ratings show that some damage has been done that will be difficult to repair, though a shift to more rain to end February, so long as we see it continue into March could help to stabilize production potential.

Over in China, the significant reduction in South American supplies and surge in values seems to have caught many crushers off guard and out of position.

However, with the recent drop in hog values, with prices off nearly 50% from where they were a year ago, soymeal demand has fallen off and crush margins remain incredibly negative for both U.S. and South American supplies. The increase in supply costs combined with the reduction in overall demand has pushed several Chinese crushers to look at shutting down for a month or so here in the short-term as they wait for the government to hopefully release supplies from reserves and a floor come in under hog prices. 

Though the country appears to be making moves to reduce short-term demand, they are still in making big purchases for both old and new crop. Old crop soybean sales have surged these last few weeks, getting us back to where hitting the USDA projection looks doable--something that seemed impossible 2 months ago. Unknown has been the biggest buyer as of late, with China in as a supporting purchaser. 

Looking ahead, we will continue to monitor what is happening in the Black Sea, South American weather forecasts and outside market moves. 

Oil has had an interesting week, posting a bit of a reversal after trading to near $100/barrel Monday, falling back to below $90 as of this writing. Iran nuclear talks appear to be coming to an end, with a deal that will likely allow Iran to resume exporting oil into the global pipeline. A report released Monday also indicated that U.S. shale production should surge throughout 2022 as it returns to profitability.

Markets are closed Monday due to the President's Day Holiday, reopening Monday night at 8: p.m. Eastern. 

Corn: unchanged

Beans: 3 cents higher

Trade Schedule for President's Day

Friday, February 18: Normal trading session

Sunday, February 20: No evening trading session

President's 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.