Morning Comments February 23, 2022

Grain bins dryer

Though the strength from the overnight markets waivered a bit upon the opening of the day session yesterday, continued concerns over what is happening between Russia and Ukraine brought buyers in midday, sending values soaring. On the day wheat closed up nearly 50 cents, corn was up 20 and beans were up 35. 

Though future plans remain unclear regarding what Russia's next steps will be, the US and its NATO allies continue to contend a full scale invasion is imminent. During the day yesterday, the Russian parliament held a vote regarding whether or not Russian troops have the ability to act outside of Russian borders, and it passed unanimously.

Though Putin contends he has not yet sent troops into the areas in question, claiming he is first waiting to see if Ukraine will simply honor the separatists' desire to leave, leaders from around the world have reacted swiftly with their first round of sanctions. 

It is interesting to note however with inflation currently running at 40 year highs here in the US and energy prices continuing to climb, many in the West are struggling with ways they can punish Putin and his cohorts without also punishing consumers from around the world already struggling to make ends meet. 

Biden spoke late yesterday pointing out how tough the sanctions the US is imposing are, yet made sure to clarify none of what is being put in place currently will impact oil or other gas flows. In addition, though many banks were sanctioned yesterday it was interesting to note the three major state-owned banks responsible for the bulk of the country's commodity trade were left untouched. 

However, though sanctions at this point have done little to limit or impact either country's ability to export grain, the concern over what could happen to a ship sailing in or near the areas in question has increased shipping costs and in some cases prompted shippers to simply say no to traveling to Black Sea ports at this time.

Currently, we seem to be at a bit of an impasse as we wait to see what Putin's next steps will be, as it appears we are at a major fork in the road, one route leading to war, the other remaining a little uncertain. 

Outside of Black Sea tensions, we continue to watch vegetable oils across the globe surge to new record highs. Of course, the reduction in Indonesian palm oil exports in late January started this move to the highside, with continued concern over supply availability out of South America keeping that market hot. 

This concern over supply reduction is being exacerbated by the recent push from the US and other countries to use soy and other vegetable oils for renewable diesel projects and sustainable jet fuel. 

Many question whether there will be enough supply of palm, soy, sunflower and other vegetable oils to both feed and fuel the world, likely bringing into play a second round of food versus fuel discussions, taking us back to the last time prices were this high and many began to question ethanol's presence in the market structure.

Export inspections were solid for corn yesterday, coming in at a marketing year high and exceeding the amount needed to ship each week to meet current USDA expectations for the second week in a row. China was in for the largest amount of corn shipped in months, taking nearly 22 million bushels on the week. 

Soybean shipments were slower than we've seen recently, though still stout from a historical standpoint for the second week in February. Wheat shipments were a nearly 5 month high as well, with Japan in as our largest customer.

Looking ahead we will continue to watch developments between Russia and Ukraine, as well as other global interactions that stem from it. China has been noticeably quiet the last couple of days, likely indicating much of what they have to say is being discussed privately. With China becoming Russia's biggest ally and likely biggest commodity purchaser going forward, what Xi says likely carries far more weight than anyone from the West.

In the end, things are going to remain extremely volatile with more big moves expected.