Morning Comments March 4, 2022

Grain bins dryer

The wheat market continued its scorched earth path higher yesterday, closing limit up across the first four months of the Chicago contract. Corn was strong, with May corn trading limit higher before falling back a touch into the close. Soybeans were also stronger throughout the day, only seeing late day selling take them down to nearly unchanged. 

The focus of the market remains the same as Russia continues its assault on Ukraine. A meeting between the two delegations was thought to have gone relatively well, though absolutely nothing was agreed upon. Midday Ukrainian President Zelensky said a resolution is unlikely to come until he and Putin speak directly, though many are beginning to wonder if anything outside of a full takeover would satisfy Putin at this point.

Late yesterday reports of Russians attacking Ukraine's largest nuclear power plant with artillery started to circulate. At one point, reports of a fire prompted concern of a potential loss in power and subsequent meltdown, a situation officials say would be 6 times worse than the Chernobyl disaster. 

Luckily, the fire was contained to an administration building and the plant continues to operate at 60% capacity though it is now under Russian control.

With the continuation of aggression even in the face of an imploding economy due to sanctions and a newfound pariah status across the globe, one must wonder what the end game becomes. Currently Germany and others say military action by NATO will not happen, though it is unclear if that will stick if we continue to see nuclear sites under attack.

Overnight we saw reports of Chinese buyers looking to use alternative payments in order to skirt banking restrictions and continue to access crude out of Russia's far eastern ports. With all of the concern regarding Chinese grain shortages, some are beginning to believe we could see China continue to source Russian wheat, though doing so will not prove to be easy in the short-term.

Speaking of China, we saw some level of confirmation regarding the purchase of corn that floated around the market Wednesday. The USDA reported a 337,000 tonne old crop corn sale to unknown yesterday morning, the first flash corn sale we have seen in several weeks. 

The USDA also released export sales for the week yesterday, showing corn sales coming in below expectations and down significantly from last week and the 4-week average. Soybean sales were in the middle of expectations, though also lower than what we've seen over the last month. New crop soybean sales seem to be the big story currently though as China continues to buy the cheaper new crop offers at a far greater pace than old crop. 

Looking ahead, we are continuing to watch developments in the Black Sea, but are also seeing some signs of significant progress when it comes to a renewed Iranian nuclear agreement. Ideas of a resolution that would allow Iran to resume oil exports pressured crude yesterday, though continued ideas that world superpowers need to also sanction Russian oil continues to provide significant support.

We will also continue to debate the next moves of the world central banks as we see commodities poised to experience their biggest weekly gain since 1960. With wheat and oil trading at its highest level since 2008, vegetable oils trading record highs and other supply chain restraints it is hard to imagine what steps could be taken to help the world consumer. 

Late yesterday we did see a report from Reuters indicating the Biden administration is looking into whether waiving biofuel blending requirements would provide relief in food prices, indicating we have hit the food versus fuel chapter of our grains rally. 

Obviously with crude trading well above $100 and global gasoline supplies lower than average it is hard to imagine removing ethanol from the world's fuel supply would help. However, with what is happening from a global vegetable oil supply and the fact that industry is mostly in its infancy, it seems renewable diesel could find itself in the crosshairs of political discontent and a hungry consumer.

Corn up 15 to 20

Beans up 3 to 4