Morning Comments May 4, 2022

Caseih Planting 70

Corn failed to sustain its early morning strength yesterday, weakening shortly after the morning reopen and closing on its lows for the day. Wheat and beans were lower as well. For the day we saw July corn and wheat down 10 with July beans down 15.

With China on holiday and not remotely active in the market to start the week, traders are seemingly starting to get into their own heads regarding demand and what further or prolonged Covid lockdowns could mean in the coming weeks and months.

Many market watchers remain perplexed as crush margins in the country remain negative even in the face of plant closures and demand for soybeans and meal remains lukewarm at best. 

Overnight Beijing announced enhanced restrictions as Covid cases there continue to climb. Citizens have now been instructed to work from home, with school and business closures ramping up across the city. Shanghai residents were excited at the thought of their multi-week lockdown ending, only to have those hopes dashed by positive cases found in areas previously deemed as low risk.

As mentioned yesterday, lack of bullish input from the palm oil market this week has also allowed pressure on the soy oil market, the leader of the complex as of late.

Traders continue to monitor what is taking place in Ukraine as Russia seems to be ramping up their aggression with the May 9th 'deadline' looming. Reports continue of Russian officials stealing or destroying grain in the occupied territories of Eastern Ukraine, with continued concern that Russia may set its sights on the Port of Odessa, Ukraine's main export terminal. 

We continue to see most analysts estimate between 20-30% of Ukrainian acreage will go unplanted this year, with a nearly 4 million acre cut to corn plantings versus pre-war estimates. Even with reduced plantings, folks are worried about where all of the grain will be held come harvest as the country's inability to export will likely lead to a 400% increase in grain ending stocks versus a year ago according to one analyst.

In any event, as we look ahead it doesn't feel as though we are any closer to a resolution in the Black Sea, with the BBC reporting yesterday that an all out declaration of war against Ukraine could be coming soon from Russia.

Here in the US we continue to monitor weather forecasts as the cool and damp pattern feels relentless. Talk of planting delays however did little to support the market yesterday as forecasts are turning much warmer and a bit drier for the bulk of May, with much above normal temperatures forecast for the Great Lakes and surrounding areas in the 6-10 day. 

In Brazil, the forecast turned drier, with another private forecaster cutting his Brazilian corn estimate to 107 mmt, down 5 mmt from his previous estimate. For those keeping score at home we now have a 107 mmt to 116.5 mmt range when it comes to production estimates or a spread of around 374 million bushels. 

Looking ahead today will be all about the Fed as Jerome Powell will take center stage this afternoon. Of course, much of what he will say has been heavily forecasted already, with traders recognizing he will likely double down on the 'control inflation no matter the cost' narrative. 

Grains have sold off into Fed meetings over the last several months rallying decently after the idea action was deferred, i.e. we were months away from actual hikes or reductions in the Fed balance sheet. Today is the day the rubber is supposed to meet the road, market reaction after could be very telling.

Corn up 6 to 8

Beans up 8 to 10