Morning Comments June 6, 2022

Corn 062419

Markets are working early this morning to reverse last week's lower trend after a weekend of events in Ukraine that were less than ideal for a perceived quick resumption of grain shipments. For the week last week we saw July wheat lose $1.18, July corn lose 50 cents with December down 40. July beans were down 35 on the week, with November down 17.

Over the weekend the tone and actions out of Russia changed slightly, with Putin threatening to hit new targets in Ukraine if the US and Europe continue to supply Ukraine with weapons. In addition to talk of new targets being hit we saw 4 different missile strikes hit targets in Kyiv for the first time in a month. 

Of those areas hit one was a railcar refurbisher locals claim was working on grain cars to help with exports. On top of targets in Kyiv being hit for the first time, reports of a major grain export facility being hit began to circulate social media. Initial reports listed the facility as a Cargill terminal with accompanied pictures showing destroyed port infrastructure and burning storage facilities. However, according to a Ukrainian analytical group this was the Nika Tera port, a medium sized port in Southern Ukraine and the storage facilities destroyed were holding sunflower meal.

Negotiations continue when it comes to opening Black Sea ports for full Ukrainian shipments with the Russian foreign minister set to travel to Turkey Wednesday. Talks hit a bit of a snag over the weekend however, when Ukraine's ambassador to Turkey accused the country of buying stolen Ukrainian wheat from Russia. Turkey denied the claims, saying there was no way they could know where the wheat they have purchased comes from even if it were to have made its way from a Ukrainian port.

In other news we finally got confirmation of the EPA's biofuel blending requirements for 2020, 2021 and 2022, with them all coming in relatively close to the initial targets outlined in December. Minor adjustments higher for 2021 obligations with a slight adjustment lower for 2022 and a refusal to allow any additional refiner waivers left renewable fuel groups happy and refiners frustrated they will be required to come into compliance.

Export sales last week were disappointing for corn and soybeans, with soybeans hitting a marketing year low on sales. China cancelled some old crop bean purchases and was absent in the new crop year for both corn and beans. 

Speaking of China, optimism over a complete reopening in Shanghai took a couple steps back as reports of streets and apartment complexes being placed back into lockdown came out late last week and over the weekend. The government continues to work to stimulate the economy, with talk of rollbacks in investment freezes and a more loose hand when it comes to financial regulations continue to be announced.

Looking ahead talk from Fed bank officials will be muted this week as the group prepares for next week's meeting. The market has all but guaranteed a 50 bps increase in rates, with little in the way of surprises expected, however last week's stronger than expected job numbers has some believing a more aggressive stance to cool the economy may be needed to get inflation under control.

Weather-wise things look to continue to be decent for much of the Corn Belt with some drier conditions expected in the wettest parts of the Dakotas. Traders are expecting over 90% of the corn crop to be planted when we get tonight's crop progress report, with soybean plantings expected to be around 85% complete. We will get the first look at corn crop conditions as well, with many reporting a solid start to their crop across the country. 

Holding today's strength will be important when it comes to rebuilding confidence in this market. We are starting to see some fund liquidation in the commitment of traders numbers, with some new fund shorts showing up as well. Seasonally corn tends to stay range bound as we try to gain confidence in the July forward forecast for pollination and grain fill. 

Corn up 10 to 15

Beans up 10 to 15