Morning Comments January 5, 2022

Challenger1000 Series Tractor Planting

The markets were on fire yesterday, celebrating the first official business day of the new year by rallying over 30 cents in old crop beans, nearly 20 cents in old crop corn, with wheat up a dime. 

Fund buying was the name of the game yesterday with outside money flowing into commodities without prejudice. Funds were said to have bought 25,000 contracts of soybeans yesterday or 125 million bushels worth of beans while buying 150 million bushels worth of paper corn. 

There had been a lot of talk as we wrapped up the year as to whether we would see fund buying return. Some felt the strength at the end of the year, as well as an already relatively long position in corn would preempt any significant fund buying, which obviously wasn't the case. 

Looking out at other commodities, it is easy to see folks are still actively trading the inflation/supply chain issues play. Lumber is back up to highs not seen since early May, crude has nearly erased all of the Omicron drop, and cotton is within shouting distance of new contract highs.

Reading commentary across the board makes this astoundingly obvious as well, as even the most experienced ag traders are befuddled by key reversals that go nowhere and a fundamental outlook that doesn't scream we need to be rationing demand. While on the other hand, we see commodity tourists, taking their first looks at the grain markets as a whole, talking about 'huge droughts' in Brazil, the long tail of inflation, and how grain prices are historically cheap in comparison to other assets. 

This new wave of interest has the potential to push us well above values we had earlier thought possible, but it will also likely make for extremely volatile moves as eventually attitudes change and corrections become swift.

From a fundamental standpoint, nothing significant changed yesterday. We are continuing to see private analysts lower their published Brazilian and Argentinian production outlooks, with one of the most well-followed crop analysts taking his Brazilian production estimate down another 2 mmt yesterday, while reducing his Argentina outlook by 3 mmt. 

Locals in the area continue to contend that northern areas will shock the market as early harvest results and crop tours have indicated the crop in Mato Grosso and surrounding states is massive. It is interesting to note that all these private analysts appear to be using their own acreage figures as some struggle to put a finger on just how many beans have been planted in Brazil over the last handful of months. Not to mention, for Argentina especially, any significant reduction in production may be premature as much of the crop has only recently been planted. 

With Brazilian bean offers still well below U.S. values, the cash market says traders there aren't afraid beans will be in short supply. 

Looking ahead, those in the know say we will see another two days of fund buying, with positions needing to be re-balanced by the end of the week. Current short-term targets for March corn and beans lie around $6.15 and $13.99, a failure at these levels could bring about a technical correction to the downside, with a breach leading us into open air from a technical standpoint with limited resistance. 

We will get updated energy information this morning, giving us further insight into ethanol production and stocks. Ethanol producers are said to have been buying a significant amount of corn as of late, but the divergence we are starting to see with corn values moving significantly higher while ethanol values remain unchanged or move lower is starting to pressure margins. 

Keep current opportunities in mind when it comes to marketing. Breaking unpriced production down into increments and selling as the market moves higher if it continues to do so, is the best way to approach situations like this. 

Corn down 3 to 4

Beans down 2 to 3