Morning Comments March 9, 2022


May wheat had a phenomenal day, opening higher on the overnight, trading expanded limits lower before recovering those losses, and finishing down slightly. The nearly $2.00 range on the day being one of the largest seen in the market, outside of a $2.30 range in 2008. 

Corn spent much of its day lower before recovering to finish higher on the day, while beans were higher on continued moves higher in palm oil due to increased export restrictions from Indonesia.

We continue to monitor the conflict in Ukraine which is now heading into its second week with little in the way of improvement. Developments yesterday were somewhat limited, though Ukraine did indicate it may not need to be a part of NATO if that would mean the aggression would stop.

Later in the day Russian President Putin signed a decree in response to the U.S. import ban on Russian oil saying all raw goods and commodity exports to the U.S. and its allies were to be stopped immediately. A list of goods and allies is to be released in 2 days. With everything already sanctioned and restricted it's unlikely this reaction means much outside of making Putin look strong to his people.

Overnight the Russian ag minister indicated that Russia would limit wheat exports to ensure stable domestic bread prices. Though again without access to the SWIFT financial system and the desire of Western nations to cease all business ties there wasn't a strong line up of buyers at this point.

As the conflict continues, we are starting to get a better feel for what supplies are still sitting in the hands of Ukrainians and what their new crop production potential could look like. Currently wheat estimates range anywhere from just under 10 mmt up to 27 million tonnes, though according to experts giving these estimates, the high end of the range is very unlikely to be achieved with the current state of affairs. Ukraine produced around 33 mmt of wheat last year and is believed to still be sitting on 3.5 mmt of last year's supplies.

Russian production remains on track to be a near record, creating a very interesting dichotomy of supply scarcity created by supply that is simply unavailable due to geopolitical conflicts.

Outside of what is happening in the Black Sea, we are continuing to watch incredible volatility in commodity markets. As we discussed yesterday, the short squeeze in the nickel market pushed prices 70% higher on Monday before doubling during Asian hours Monday night into Tuesday. The incredible move higher pushed the two companies mostly responsible for short hedges in the nickel markets to the breaking point, needing to secure billions in credit for several banks to just meet margin calls. 

The London Metal Exchange announced they were cancelling all trades made during Monday night and Tuesday morning's trade before the markets were closed, likely indicating that move not only would have broken the hedger and their broker, it also threatened the health of the exchange. In addition to announcing the cancellation of trades the LME said the nickel market would remain closed until Friday as they sort out the situation.

Commodities have been pushed as a safe haven, though judging by the reduction in open interest the traditional players are taking some cash to the sidelines, hoping to wait out the current storm.

Looking ahead, we will get updated USDA supply and demand numbers today. Little in the way of surprises is expected with slight reductions to soybean and corn carryout anticipated by traders. World carryout is also likely to be reduced as the USDA works to pin down South American production and just what the conflict in the Black Sea may mean for the world export market.

Volatility is likely to continue as headline risk remains big and traders are uncertain where we need to head next. 

Corn down 5 to 6

Beans up 10 to 20