Morning Comments March 11, 2022

Combine Grain Cart

May wheat continued its epic plunge from recent highs, down $1.14 on the day yesterday and over $2.00 off its highs set just earlier this week. Corn and beans were bolstered by big export sales weeks, both pushing to the high side with May corn up 23 and May beans up 14 on the day. 

Of course, we continue to monitor what is happening between Russia and Ukraine as the conflict enters its third week. Many were disappointed to learn limited progress was made yesterday as obviously the longer this situation drags on the worse it is, not only for the economies of the two countries at war, but also for the global economy as a whole. Not to mention, of course, the humanitarian concerns as over 2 million Ukrainians flee the country and more bombing in residential areas is reportedly taking place.

This morning rumors are circulating that perhaps a direct meeting between Putin and Zelensky could take place soon, though it appears as though the Kremlin feels more in the way of negotiations need to take place before the two leaders begin direct communication.

Ukraine had hoped a fast-track admittance into the European Union would force a ceasefire with Russia not wanting an all-out hot war with the West or NATO. However, overnight a meeting of EU leaders took place, during which all agreed a fast-track acceptance was not the way to go as other nations also wait for their admittance into the bloc, something that is neither fast nor easy. In the end they agreed to allow Ukraine to take the necessary steps to become an EU member through traditional avenues.

As we discussed yesterday, Putin had signed a decree earlier in the week banning exports of over 200 items. Many had feared he would react strongly to sanctions and other moves by limiting energy exports to Europe, one of the reasons we saw European energy values hitting record highs to start the week. However, upon review of the list in question there were limited items Russia actually exports, as medical equipment, agricultural machinery, rail cars, and other items tend to be imported into the country and rarely exported. 

Russia also announced an export ban on grain exports into former Soviet Union countries until at least August, something that is also with limited impact as few of those countries do active business with Russia on grains. 

Outside of Black Sea developments we got updated CPI data showing inflation continues to run at its highest level in over 40 years. According to data released yesterday, consumer prices were up 7.9% in February, its biggest year-over-year increase since January of 1982. Food and energy prices were at the core of the increase, though according to analysts it is hard to find any portion of the economy that hasn't been hit with higher prices. 

Many had anticipated inflation would peak here in the U.S. in February, though now that appears to be a pipedream as many experts expect continued increases in the months ahead with some calling for a peak somewhere around 9%. The Fed will meet next week with continued expectations of a 25-point increase in rates to be announced.

The European Central Bank is meeting this week and decided to leave rates unchanged, as expected due to the perilous situation in the region. They were clear to add that though no rate increases were taking place currently, they were doing what they could to slow money flow. As one member of the bank put it, they are “taking their foot off the accelerator but not yet hitting the brake."

In addition to central bank news, we got updated export sales yesterday with huge numbers posted for soybeans and corn on the week, catching some traders off guard. Though we had anticipated decent figures for beans due to the almost daily flash sales announcements, corn exports of over 2 million tonnes on the week came as a bit of a surprise as we had only seen one decent sized flash sale announced.

As mentioned, at just over 2.1 million tonnes corn export sales were a marketing year high. Unknown was in for the bulk of purchases buying over 800,000 tonnes, though only 337,000 of which had been reported in the daily system. Japan was the second largest buyer, in for over 300,000 tonnes as they work to shore up supplies into the summer months.

The recent push in sales has strengthened Gulf values big time over the last couple of weeks, though freight costs jumping in tandem may continue to provide pressure on interior basis values.

Looking ahead, we will likely see continued volatility as we head home for the weekend. There are far too many unknowns for many to feel comfortable with any type of major position here as we have seen major commodities experience massive run ups followed by major sell offs in only a matter of days. 

Corn down 5 to 8

Beans down 15 to 20