A massive move lower in the markets Friday seemed to have caught even the most seasoned trader off guard as we saw corn and wheat trade limit down by the end of the day, while soybeans continued to experience heavy losses as well.
There continues to be a plethora of moving pieces when it comes to what is taking place on the geo-political stage, with increased volatility expected to continue for the foreseeable future. What we do know currently is shipping out of Black Sea ports will be on the backburner indefinitely as reports of more than one cargo ship being hit by artillery has basically shut down any movement.
With the inability to load grain, we are seeing a short-term shift in demand, with reports of some buyers turning to Argentina for their nearby needs. The shift in global demand will likely create shortages or impact local market structures far more than what we may see in the futures market, with many analysts reporting some of the downward pressure in Friday's market came from commercials hedging their physical long in the Black Sea.
In addition to conversations regarding commercials hedging their physical risk, some talk began to circulate Friday indicating some of the larger long side investors we have seen enter the market recently may have been instructed to pull back some of their exposure.
The massive swings we have been seeing in the market are not something hedge fund managers and other long-term investors want to experience, and with other economic indicators pointing towards better investments shaping up elsewhere, a bit of a drawdown in exposure feels necessary, according to some industry insiders.
Over the weekend we saw fighting ramp up with talk of Russian military forces being instructed to capture Kyiv by Monday. As a result of the increase in fighting, world leaders began to change their tune regarding Russia's access to the SWIFT financial system as well as other sanctions that would hit Russia's energy sector.
As we had discussed last week, the lack of foreign interest in launching a full-on attack to Russia's financial industry had in a way emboldened Putin and left him able to finance a long-term military endeavor if necessary. However, over the weekend European leaders started to shift their initial thoughts, with Germany finally relenting and agreeing to a full-on set of sanctions.
The removal of Russia from the SWIFT system has restricted their ability to communicate with other world banks, in essence freezing the hundreds of billions of dollars in assets the Russian Central Bank has amassed. In addition to the freezing of assets, it has restricted the ability of other countries to pay for goods purchased. As a result of the move, we saw Russia's currency fall nearly 30% overnight before recovering slightly.
As of this morning, delegations from both sides have agreed to meet at the Belarusian border to discuss what happens next. Ukrainian President Zelensky, having emboldened his people by standing beside them willing to fight, is calling for a complete and immediate ceasefire, though he expects very little to come from today's talks.
In addition to conversations between the two country's delegations, Ukraine has asked to become a part of the European Union, with many leaders of the bloc supporting the idea.
Concern now becomes what Putin's next steps are as many feel the inability to quickly take Ukraine has become an embarrassment for him and his associates. With China being the country most likely impacted when it comes to grain supplies, it is also likely he is seeing pressure to stand down from his friend Xi as well.
Looking ahead, we will get updated export inspections this morning. Corn shipments are expected to come in strong once again, with a continued decent pace for beans. Export sales were solid again last week, with unknown continuing to purchase old crop soybeans.
South American weather looks to be wet in many of the areas needing moisture, and drier in some of the areas needing some dryness to wrap up harvest and get second crops planted. Parana officials are expecting their second crop corn production to come in nearly 10 mmt higher than a year ago on early plantings and relatively ample moisture so far in the season.
Corn up 22 to 26
Beans up 35 to 40