Morning Comments May 11, 2022

Soybean Field Sunshine

Both grains and outside markets found support yesterday, managing to close with gains pretty much across the board. On the day we saw July corn close up 3, with December corn up 8. Chicago wheat closed unchanged while Kansas City and Minneapolis classes saw 8-10 cent gains. Beans were up 8.

News felt relatively limited compared to what we have grown accustomed to as of late, it seemed. U.S. officials addressed the war in Ukraine yesterday, saying it appears as though Putin is gearing up for a prolonged conflict. Reports of missile attacks in Odessa are raising concerns Russia may soon attack port infrastructure as well.

Interesting to note, the attacks on Odessa seem to be on the increase after Ukrainian President Zelensky requested help from the EU and other allies to get the Black Sea ports back open. Zelensky and UN officials both claim upwards of 25 mmt of grain remains 'trapped' in the country due to the inability to ship by sea. 

While progress when it comes to reopening ports remains limited, we are seeing some progress when it comes to shipping grain via land out of Ukraine, though pace remains less than 20% of pre-war capacity. Ukrainian and EU officials are said to be working out a plan that would allow more grain to move through neighboring countries to access other port infrastructure. Phytosanitary rules and other logistical complications need to be addressed first, but it appears many in the region are also gearing up for a prolonged conflict. 

Outside of what is happening in the Black Sea, we continue to monitor what is taking place in China as the situation in Shanghai does not seem to be improving much and case counts in Beijing continue to rise. 

Overnight, Chinese officials released CPI data for April, showing a jump in consumer costs. Analysts believe the increase in prices seen in April could be attributed to a jump in food costs thanks to a surge in consumers stocking up ahead of potential Covid lockdowns and logistical snarls due to lockdowns in other provinces. 

Perhaps more concerning than the jump in costs was the drop in consumer demand seen, indicating citizens are staying close to home and reducing needs even in areas not directly impacted by shutdowns. 

Some analysts believe this morning's data could potentially open the door for the Chinese government to stimulate the economy. Some optimism that perhaps Chinese officials may revisit their Covid Zero approach after seeing its impact on the economy has returned as well, bringing buyers back into Asian markets overnight.

Looking ahead, we will get updated CPI data this morning as well, with traders expecting April's inflation figures to show an 8.1% increase in prices year over year, down from last month's 8.5% increase but still some of the highest inflation figures seen in four decades.

The continued hot streak when it comes to inflation has several members of the Fed saying they are open to a 75-point increase if needed, a more aggressive stance than Fed Chair Powell alluded to in his press conference last week when he said a 75 point increase wasn't actively being discussed. 

Outside of CPI and other economic data, traders will be watching this morning's energy figures to see if record high gas and diesel prices are starting to shift demand or if we are beginning to catch up when it comes to reduced supplies. Ethanol figures will be looked at closely as well as we saw another uptick in production last week with a slight reduction in supplies.

Weather-wise, the forecast remains open for a good portion of the Corn Belt in the coming days with much of the upcoming rainfall centered over Minnesota and the Dakotas. 

Markets are stronger so far this morning, as has become tradition as of late on CPI days. Strength in Asia will likely carry forward, with traders looking to see if Chinese grain buyers start showing interest when it comes to imports again. 

Corn up 4 to 6

Beans up 5 to 10