Morning Comments March 18, 2022

Cover Crop

Grains did an about-face yesterday, turning around after Wednesday's lower trade, with corn gaining back nearly all of its losses from the day prior. Wheat recovered 28 cents of the previous day's limit down move, while May beans were up 19.

The shift in tone from Russian leaders yesterday seemed noticeable as frustration and anger appear to be boiling over when it comes to lack of progress both militarily and in negotiations. Most headlines yesterday were of the distance between the two sides, an abrupt change from Wednesday's talk of a roadmap to peace. Ukrainian officials seemed noticeably silent, continuing to insist progress is being made.

This morning Russian officials are accusing the Ukrainian side of dragging out talks, with Putin telling the German Chancellor that Ukraine's proposals are unrealistic. However, in a dose of what could be viewed as good news, the Department of Defense said late yesterday that no Russian shelling was observed in Ukraine in a 24-hour period prior. The first time in nearly 4 weeks that could be said. 

While we continue to monitor what is happening in the Black Sea closely, we are also watching what is happening when it comes to U.S. and Chinese relations. For much of the start of the conflict China was surprisingly quiet regarding what was taking place, with many taking notice when government officials refused to call what Russia was doing an invasion. 

As time has gone on, China has denounced what is taking place, publicly asking for cool heads to prevail and all sides to lay down arms. However, the longer the conflict goes on the more conflicted China becomes, as the need to isolate themselves from surging global commodity costs becomes greater. 

Yesterday we saw the Chinese commerce minister make it clear China does not agree with the sanctions being placed on Russia, with an announcement they will continue to do business with both countries uninterrupted no matter what the West requests. Soon after this announcement the Biden administration requested a meeting with Chinese President Xi, looking to reiterate his threats regarding any country or business found skirting sanctions. 

Overnight Chinese media released some harshly worded thoughts regarding the U.S., sanctions, and meddling when it comes to Taiwan, indicating that perhaps today's meeting will not be as cordial as one would hope.

Outside of what feels like a never-ending cycle of Russia/Ukraine and China news, we saw the Indonesia government reverse their previous moves to restrict palm oil exports yesterday. As you may recall, officials had initially placed a 20% export restriction on the industry, requiring that 20% of product exporters would typically send into the global pipeline would be held back for domestic usage. 

Just a week ago government officials had increased the restrictions to 30%, creating chaos in the industry and further exacerbating global food shortage fears. However, issues in tracking, among other things, prompted officials to walk restrictions back, instead increasing the maximum export levy that can be placed on palm oil by 200/tonne. This is the 6th policy change regarding palm oil exports since January.

Export sales yesterday were solid once again for corn, coming in just above trade expectations. Japan was our biggest buyer on the week, with Unknown in as the second largest purchaser after making large purchases a week ago as well. Soybean exports remained stout for a week in March, with China and Unknown in as the biggest buyers.

Wheat sales were awful as U.S. prices remain uncompetitive in the global market. Some traders are beginning to wonder if we aren't perhaps overstating global demand as the slowdown in wheat shipments from Ukraine and Russia haven't really prompted a wave of cash short covering like one would expect. 

Interesting to note though, grain is still moving out of Russian ports albeit slowly. Records indicate 73 ships left Russia loaded with grain the first half of March, down substantially from the 220 shipped in that same period a year ago. Oil, however, continues to ship relatively uninterrupted, with shipments down only slightly from a year ago.

Looking ahead, we will continue to monitor any developments for peace between Russia and Ukraine as well as pay attention to any major headlines coming from the Biden/Xi meeting. As an expert put it yesterday, the side China chooses to align with in the coming days and weeks will likely have long lasting global implications for years to come. 

I didn't think it was possible, but it appears things will only continue to get more interesting as we work our way into the growing season.

Corn down 2 to 4

Beans up 6 to 8