Morning Comments June 3, 2022

Sillouette Sunset Location Rail

Wheat and beans were able to maintain strength throughout the day yesterday, while corn continued to struggle a bit. At the close, we saw July corn down 1 with December corn up 3. July wheat was 17 higher, while July soybeans were up 39, with November up 26.

Much of the conversation yesterday continued to center on what is taking place in the Black Sea and whether or not we will see Ukraine able to reenter the global market with the bulk of their grain supplies. Turkey announced that it has the first draft of a road map to reopening ports put together with a meeting between Ukraine, Russia, Turkey, and UN officials set to be held next week. 

The road map which is said to have been built after negotiations with all parties will focus on routes, insurance, and security guarantees with a command center set to be opened in Istanbul, Turkey. Interesting to note Russia announced the removal of export limitations on several of their fertilizer products, while some believe this was an act to show good faith, others say an update to the export quotas was set to take place no matter the geopolitical situation.

Traders and renewable fuels groups expect the EPA to announce updated and final biofuel blending requirements for 2020 through 2022 today. According to sources, the 2020 blending requirements will come in as indicated in late last year's proposal, with a slight increase in ethanol blending requirements expected from the proposal for 2021. 

Early indications for 2022 requirements were disappointing to biodiesel and renewable diesel groups last December, with requirements coming in lower than initially expected. However, there was some chatter yesterday that more supportive figures could be seen in the EPA requirements released today. Talk of increased biodiesel blending in Brazil lent support to the complex as well, helping send soy oil higher and soybeans back to within shouting distance of recent highs.

Ethanol production figures released yesterday showed a sharp uptick in production week over week as moves in the energy complex continue to incentivize supply growth. Stocks were down on the week as refiners are working to keep the gasoline supply pipeline as full as possible.

Weather-wise much of the wettest portions of North Dakota are expected to remain dry in the week ahead, with the rest of the Corn Belt looking to see cooler than normal temperatures and rain. Meteorologists remain somewhat perplexed by the recent shift over to much wetter conditions as La Nina remains present, something that tends to translate into much drier conditions, especially in the Southern Plains.

Forecasters continue to point to the risk of hotter and drier than normal conditions developing, though model runs continue to indicate a relatively benign pattern through at least the next two weeks, with some talk of wetter than normal conditions remaining in place across much of the Corn Belt through the 10th of July.

Looking ahead we will get updated export sales figures this morning, with traders expecting marginal sales for corn, beans and wheat. We saw a big sales announcement yesterday to Pakistan for new crop beans but continue to see relatively mundane buying interest elsewhere. 

There was a lot of talk yesterday regarding Chinese demand and buying interest, though nothing in the cash market really indicates they are moving aggressively in either beans or corn.

Interesting to note we have seen an uptick in open interest for corn this week, in the face of a move lower. Open interest is as it sounds, an indication of how many participants are actively trading in the market. When a market makes a big move, traders look to open interest to see if it is increasing or decreasing, an increase of course indicates new participants, while a decrease indicates folks are closing out trades and leaving the market. 

In the face of the recent sell off in corn, many would have believed it was fund longs looking to leave the positions they have open, however, the increase in open interest as the market has moved lower would indicate new speculators are entering the market as sellers.

After the close yesterday, the USDA released average prices for April. It should come as no surprise corn, soybeans and wheat all set new record highs. At $7.08 corn outpriced the April high set at $6.97 in 2013, while soybeans blew their previous April record, also set in 2013, out of the water by $1.40 with an average price of $15.80. Wheat set a new record high as well, nearly $2.00 higher than the previous high set in April of 2011.

We're likely to see some solid back and forth today as we await EPA and export updates ahead of the weekend.

Corn up 2 to 4

Beans down 4 to 7