Morning Comments March 30, 2022

Sillouette Sunset Location Rail

Markets were down hard yesterday, though wheat and corn both managed to recover a bit from early limit down trades. When the closing bell rang, we saw wheat down 42, May corn down 22, and December corn down 11. Soybeans finished 20 lower.

Talk of a de-escalation in Ukraine through a potential withdrawal of Russian troops from around Kyiv and another major city to the north was enough to push traders towards aggressive selling yesterday. However, after the close U.S. officials were quick to point out that the moves we are seeing are likely more to do with regrouping troops and assessing supplies ahead of another round of aggression as opposed to signs Russia is willing to take part in a ceasefire. 

Russian military leaders did provide some insight into their possible next steps late last week, saying that the first round of their planned military operations was complete, with their focus turning to the Eastern regions of Ukraine where Russian-backed separatists remain. 

There seem to be two schools of thought currently, the first being that Russia takes a moment to regroup its troops only to try to take Kyiv yet again, something that has proven to be an outright failure in the first month of the war. Or they begin troop movement to the Donbas region we discussed prior, working to take that and the territory between it and Crimea as their own. 

While any continuation of aggression is unwanted, a focus on the Eastern region as opposed to an outright assault throughout large swaths of the country could possibly provide some opportunity for a return to whatever a new normal looks like for a portion of the country's ag belt just ahead of Spring planting. However, production in Ukraine will be disrupted in a major way this year and beyond, no matter how quickly the war ends. 

Interesting to note, we are seeing some potentially seismic shifts in global wheat trade as a result of the war in Ukraine. Over the last several years Egypt has become an aggressive buyer of Black Sea wheat, purchasing over half of its imports from Russia just last year. Many were concerned Egypt could be the country most impacted by the sharp drop in available supply out of the region, with some pointing to the protests and anti-government uprisings that took place the last time we saw a spike in food prices.

However, it appears India is looking to step in to fill the void caused by the war in Ukraine, meeting with Egyptian delegates the first part of April to discuss potential wheat purchases. India typically keeps its wheat on hand, refusing to export supplies as it has always worked to avoid shortages. As a result, it has amassed record large on-hand supplies with another harvest around the corner. 

Analysts believe India could supply Egypt with close to 12 mmt of wheat, potentially supplying the country with the lion's share of its needs this year and beyond.

Looking ahead, we will continue to monitor peace talks as another round is being held this morning. Chatter this morning out of the Kremlin is a little less idyllic than what was heard yesterday, saying the talks weren't a “break through”, but that it was helpful Ukrainian negotiators are willing to put their demands in writing.

We will also watch developments in China as it appears lockdowns may only continue to grow as Omicron continues to spread. Traders finally got confirmation that the Chinese government will begin to release soybean stocks, with a 500,000 tonne auction set to be held Friday. The government expects this week's auction to be the first of 10 total, with 350k to 500k tonnes of beans offered each week.

This release of supplies has all but shut off old crop import buying out of China in the short-term as domestic soybean meal values have fallen off significantly again and crushers are finding themselves yet again looking at big losses for every tonne produced. 

We will get updated energy information this morning. We continue to monitor ethanol stocks for any indication supplies are starting to move out of the country. Overwhelmingly large supplies are starting to cut into plant profitability as the finished product continues to get cheaper and gasoline demand feels flat at best. 

Headline risk remains and with the planting intentions and quarterly stocks report set to be released tomorrow it is likely we will see even more volatility as a result. Today is the day to get your target orders in place if you haven't done so already; we're 70 cents above the spring crop insurance price for corn and that's nothing to sneeze at, even if you are bullish.

Corn up 4 to 6

Beans up 2 to 4