Morning Comments May 26, 2022

Challenger1000 Series Tractor Planting

Dip buyers returned to the grain markets midday yesterday, turning what started out as a worrisome day from a technical perspective in the corn market to a somewhat positive one. At the close we saw July wheat down 6, July corn up a half a cent, with December down 2. Soybeans saw the July contract finish 12 lower, with the November down 4.

Much of the conversation yesterday centered around Russia and its willingness to work with UN officials to reopen ports for shipments of grains. As it stands currently, there are so many moving pieces and developments in this story, even the world's ag reporters are having a difficult time providing accurate insight into just what is taking place it seems. 

As of this morning, it appears Russia is working to reopen the port in Mariupol for its own use after troops were able to capture the city. There have been conflicting reports of just what they are looking to ship out of the port, and if they are even able to, as most of the ships have been abandoned and have been sitting loaded with grain for 3 months. Ukrainian officials worry the reopening of the Mariupol port will facilitate further theft of Ukrainian grain, while Russian officials continue to work to annex much of the region surrounding the city.

What world officials are really working towards, however, is a reopening of the port in Odesa and a promise that citizens loading and shipping grain will be kept safe. Russia says they are willing to negotiate such an agreement, but that it will only happen if a rollback in Western Sanctions takes place.

While the West is a hard no when it comes to the rollback of sanctions, the UN's Secretary General has indicated most anything is up for negotiation as they say the world needs to see normal shipments of grain and fertilizer out of the region. Russia continues to contend that the West needs to remedy problems with logistics, transport, insurance, and bank transfers their sanctions have caused.

We now have hit the point in the war where the West can remain staunch in their sanctions, keeping much needed grain out of the global pipeline, or they risk looking soft. The politicization of food supply will continue to evolve throughout 2022 into 2023, likely continuing to upend and change global grain flows in front of our eyes. 

In other global grain news, many contend that the Brazil/China deal will have limited impact on old crop corn demand. This is not surprising, as it will take at least 3 months to prepare documents and inspection protocol to meet Chinese specifications. However, the idea that we could see China able to import Brazilian corn September forward with the potential reopening of Ukraine's ports is likely to continue to weigh heavy on corn prices, especially since China has been our only buyer of note as of late.

Other concerns are starting to grow regarding credit and the ability of certain countries to put together enough cash to purchase agricultural commodities, as the cost of one boat is in the tens of millions, without even covering the higher cost of freight. Talk of potential global demand destruction continues to be whispered, while many others seem to keep their global grain demand projections unfazed by higher prices.

Looking ahead, we will get updated export sales this morning at 8:30 a.m. Eastern. Traders are expecting relatively small figures on the week as it seems buyer inquiries are thin.

Weather-wise, much of the country will see rain, with the areas that need dry weather the most looking to stay open for planting progress into Sunday. Reports indicate a lot of progress being made in the areas able to go, with growers there focusing on spring wheat and corn plantings, intending to follow up with beans when able.

Overnight markets are again showing major weakness with traders not waiting for confirmation of a deal with Russia to move to the sidelines, especially ahead of a three-day weekend here in the U.S. and relatively benign weather for the most part. Today is again an important day when it comes to corn performance from a technical perspective, with us again testing key support levels.

Corn down 10 to 15

Beans down 3 to 7