Morning Comments May 23, 2022

Beans 062419

Grains had another tough session on Friday, led lower by wheat again as limited interest and a perception of better weather in some major wheat producing regions had traders looking for the exits ahead of the weekend. When the closing bell rang, we saw corn down 4, Chicago July wheat down 32, while Minneapolis was off 51. July beans were up 15 with November beans 7 higher.

News remains sparse. Developments are limited when it comes to the war in Ukraine, though one could say the political rhetoric ramped up regarding food shortages over the weekend. World leaders continue to come together and push for ways to reopen Ukraine's Black Sea ports, though progress remains limited and Russia continues to insist it is Western sanctions causing the spike in food costs, not their war.

President Biden will be traveling throughout Asia this week, continuing to discuss global trade and the economy. Plans were announced over the weekend that Biden will also meet with the Prime Minister of India, during which he has said food security and their ban on wheat exports will be discussed. 

In addition to giving insight into what he and the Prime Minister of India will discuss, President Biden was vocal about China, our trade policies and what will happen if aggressions towards Taiwan were to happen. 

There has been a big push as of late from some economists surrounding the administration to completely remove the 2018 tariffs put in place as they claim they are contributing to inflation. President Biden said the removal of tariffs will be discussed when he returns from the trip, indicating it is likely to happen. He also said the U.S. would respond militarily if China were to attack Taiwan, partially undoing whatever goodwill a lifting of tariffs could bring about.

Speaking of China, their approach to Covid and what they are doing to support the economy battered by lockdowns will be in focus this week as well. Cases in Beijing continue to show signs of community spread, with restrictions growing and more citizens being required to work from home. 

On the stimulus side of things, China is expected to add $5.3 trillion dollars to its economy in the coming months, according to Bloomberg, as they work to stabilize their struggling property sector and invest in infrastructure. The government also announced $1.5 billion in subsidies for grain farmers, with a desire to improve production practices and incentivize planting.

When it comes to grain procurement and feed supplies, Sinograin announced another round of bean auctions will be held in coming weeks. This second round of auctions will come after an initial round of beans was offered over a ten-week period, totaling 5 million metric tons. 

Weak demand was seen in the initial offering with only around 20-30% purchased each week. The slow pace in buying has so far been attributed to logistical issues and an uncertainty regarding the ability to get supplies after purchase, though crush margins still deeply in the negative may have had some influence too.

Rumors circulated Friday that China had made some large purchases of Brazilian corn as well. The two countries do not currently have a phytosanitary agreement in place however, limiting corn trade between the two nations. While long rumored, an agreement between the two could have long lasting implications on global trade flows. 

Looking ahead, we will get updated export inspections this morning. Traders continue to monitor Chinese loadings for both beans and corn as sales on the books remain relatively large. We need to see around 55 million bushels of corn ship each week, with around 20 million bushels of beans. Wheat shipments are expected to be slow as we wrap up the old crop season, with new crop harvest just getting underway in Texas. 

After the close we will get updated crop progress figures as well. Traders are expecting to see another week of decent planting pace across much of the Corn Belt, though overall progress is expected to remain some of the slowest on record. Cold temperatures over the weekend had many farmers in the Western Corn Belt grateful the crop is as far behind as it is as frost and freeze warnings stretched down well into Nebraska and Iowa. 

The Northern Plains is looking to get a much-needed open planting window, with much of their rain expected to hold off late into the 7-day. The areas unplanted throughout the rest of the Corn Belt won't be so lucky, with soaking rains expected just about everywhere throughout the next week. The 6-10- and 8-14-day forecasts continue to call for above normal temperatures with above normal precipitation for much of the Corn Belt.

Wheat is starting the week firm, with strength also seen in soybeans and corn this morning.

Corn up 3 to 5

Beans up 3 to 5